UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X]	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the year ended December 31, 2006 or

[ ]	Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ________________to___________________

Commission File Number 0-19046

	MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

(Exact name of registrant as specified in its Limited Partnership Agreement)

		DELAWARE		        				13-3589337
(State or other jurisdiction of			   	  (I.R.S. Employer
 incorporation or organization)		 	 	  Identification No.)

Demeter Management Corporation
330 Madison Avenue, 8th Floor
New York,  NY                           			 	   10017
(Address of principal executive offices)		 		 (Zip Code)

Registrant?s telephone number, including area code 	    (212) 905-2700

Securities registered pursuant to Section 12(b) of the Act:

									  Name of each exchange
    Title of each class 						  on which registered

		None								    None

Securities registered pursuant to Section 12(g) of the Act:

	Units of Limited Partnership Interest

	(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.  Yes          No  X

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.  Yes         No   X

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes   X      No  _____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant?s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of
this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definitions of ?accelerated
filer and large accelerated filer? in Rule 12b-2 of the Exchange Act.  (Check
one):

Large accelerated filer___  Accelerated filer____  Non-accelerated filer   X

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).  Yes       No  X

State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant.  The aggregate market value shall be
computed by reference to the price at which Units were sold as of the last
business day of the registrant?s most recently completed second fiscal quarter:
$41,853,353 at June 30, 2006.

DOCUMENTS INCORPORATED BY REFERENCE
	(See Page 1)


<page> <table> MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.
(formerly, Dean Witter Portfolio Strategy Fund L.P.)
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2006
                      <caption>
                                     Page No.

												<c>
DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . .1

Part I .

  Item 1.	Business . . . . . . . . . . . . . . . . . . . . . . . .2-5

  Item 1A.	Risk Factors . . . . . . . . . . . . . . . . . . . . . .5-6

  Item 1B.	Unresolved Staff Comments. . . . . . . . . . . . . . . . .6

  Item 2.	Properties . . . . . . . . . . . . . . . . . . . . . . . .6

  Item 3.	Legal Proceedings. . . . . . . . . . . . . . . . . . . . .6

  Item 4.	Submission of Matters to a Vote of Security
           Holders. . . . . . . . . . . . . . . . . . . . . . . . . .6
Part II.

  Item 5.	Market for Registrant's Partnership Units
           and Related Security Holder Matters. . . . . . . . . . . .7

  Item 6.	Selected Financial Data. . . . . . . . . . . . . . . . . .8

  Item 7.	Management's Discussion and Analysis of
           Financial Condition and Results of Operations. . . . . 9-31

  Item 7A.	Quantitative and Qualitative Disclosures About
           Market Risk. . . . . . . . . . . . . . . . . . . . . .31-44

  Item 8.	Financial Statements and Supplementary Data. . . . . .44-45

  Item 9.	Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure . . . . . . . . . 45

  Item 9A.	Controls and Procedures . . . . . . . . . .  . . . . .45-48

  Item 9B.	 Other Information . . . . . . . . . . . . . . . . . . . . 48

Part III.

  Item 10.	Directors, Executive Officers and Corporate
       Governance. . . . . . . . . . . . . . . . . . . . . . 49-56

  Item 11. Executive Compensation . . . . . . . . . . . . . .  . . .56

  Item 12. Security Ownership of Certain Beneficial Owners
           and Management and Related Security Holder Matters. . .. 57

  Item 13. Certain Relationships and Related Transactions, and
       Director Independence. . . . . . . . . . . . . . . . . . 57

  Item 14. Principal Accountant Fees and Services . . . . . .  . 57-59
Part IV.
  Item 15. Exhibits and Financial Statement Schedules. . . . . ..60-61

</table>



<page>



              DOCUMENTS INCORPORATED BY REFERENCE


Portions of the following documents are incorporated by reference
as follows:



         Documents Incorporated             Part of Form 10-K

     Partnership's Prospectus dated
     May 12, 1997                                   I

     Annual Report to Morgan Stanley
     Portfolio Strategy Fund L.P.
	(formerly, Dean Witter Portfolio
	Strategy Fund L.P.) Limited
     Partners for the year ended
     December 31, 2006       		            II, III, and IV



























	<page> PART I
Item 1.  BUSINESS
(a) General Development of Business. Morgan Stanley Portfolio
Strategy Fund L.P. (formerly known as Dean Witter Portfolio
Strategy Fund L.P.) (the "Partnership") is a Delaware limited
partnership organized in 1990 to engage primarily in the
speculative trading of futures and forward contracts on physical
commodities and other commodity interests, including, but not
limited to, foreign currencies, financial instruments, metals,
energy, and agricultural products.  The Partnership commenced
trading operations on February 1, 1991.

Effective July 20, 2006, Dean Witter Portfolio Strategy Fund L.P.
was renamed to Morgan Stanley Portfolio Strategy Fund L.P.

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?).  The non-clearing commodity broker is
Morgan Stanley DW Inc. (?Morgan Stanley DW?).  The clearing
commodity brokers are Morgan Stanley & Co. Incorporated (?MS&Co.?)
and Morgan Stanley & Co. International Limited (?MSIL?).  MS&Co.
acts as the counterparty on all of the foreign currency forward
contracts.  In 2007, Morgan Stanley intends to merge Morgan
Stanley DW into MS&Co.  Upon completion of the merger, the
surviving entity, MS&Co., will be the Partnership?s principal U.S.
commodity broker?dealer.  Demeter, Morgan Stanley DW, MS&Co., and
MSIL are wholly-owned subsidiaries of Morgan Stanley. John W.
<page> Henry & Company, Inc. (the ?Trading Manager?) is the
trading manager to the Partnership.

The Partnership began the year at a net asset value per unit of
limited partnership interest ("Unit(s)") of $2,727.77 and
returned (18.9)% to $2,213.24 on December 31, 2006.  For a more
detailed description of the Partnership's business see
subparagraph (c).

(b) Financial Information about Segments. For financial infor-
mation reporting purposes, the Partnership is deemed to engage in
one industry segment, the speculative trading of futures and
forward contracts.  The relevant financial information is
presented in Items 6 and 8.

(c) Narrative Description of Business.  The Partnership is in the
business of speculative trading of futures and forwards, pursuant
to trading instructions provided by its Trading Manager.  For a
detailed description of the different facets of the Partnership's
business, see those portions of the Partnership's prospectus,
dated May 12, 1997 (the ?Prospectus?), incorporated by reference
in this Form 10-K, set forth below:


  Facets of Business

  1.  Summary                    1.  "Summary of the Prospectus"
                                     (Pages 1-12 of the
                                     Prospectus).

<page>
  2.  Futures, Options, and      2.  "Futures, Options, and
      Forwards Markets               Forwards Markets" (Pages
                                     48-52 of the Prospectus).

  3.  Partnership's Commodity    3.  "Investment Programs,
      Trading Arrangements and       Use of Proceeds, and
      Policies                       Trading Policies" (Pages
                                     42-44 of the Prospectus),
                                     and ?The Trading Advisor"
                                     (Pages 55-74 of the
                                     Prospectus).

  4.  Management of the          4.  "The Management Agreement"
      Partnership                    (Pages 76-77 of the
                                     Prospectus). "The
                                     General Partner" (Pages
                                     45-47 of the Prospectus),
                                     "The Commodity Brokers?
                                     (Page 75 of the
                                     Prospectus), and "The
                                     Limited Partnership
                                     Agreement" (Pages 79-82
                                     of the Prospectus).

  5.  Taxation of the Partner-   5.  "Material Federal Income
      ship's Limited Partners        Tax Considerations? and
                                     "State and Local Income
                                     Tax Aspects" (Pages 88-96
                                     of the Prospectus).


(d) Financial Information about Geographic Areas. The Partnership
has not engaged in any operations in foreign countries; however,
the Partnership (through the commodity brokers) enters into
forward contract transactions where foreign banks are the
contracting party and trades futures and forwards on foreign
exchanges.

(e) Available Information.  The Partnership files an annual
report on Form 10-K, quarterly reports on Form 10-Q, current
<page> reports on Form 8-K, and all amendments to these reports
with the Securities and Exchange Commission (?SEC?). You may read
and copy any document filed by the Partnership at the SEC?s
Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549.  Please call the SEC at 1-800-SEC-0330 for information on
the Public Reference Room.  The Partnership does not maintain an
internet website, however, the SEC maintains a website that
contains annual, quarterly, and current reports, proxy
statements, and other information that issuers (including the
Partnership) file electronically with the SEC.  The SEC?s website
address is http://www.sec.gov.

Item 1A.  RISK FACTORS
The following risk factors contain forward-looking statements
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in ?Quantifying the Partnership?s
Trading Value at Risk? in Item 7A ?Quantitative and Qualitative
Disclosures About Market Risk? are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements
of historical fact.  The qualitative disclosures, except for (A)
those disclosures that are statements of historical fact and (B)
the descriptions of how the Partnership manages its primary market
risk exposure, in the ?Qualitative Disclosure Regarding Primary
<page> Trading Risk Exposures? in Item 7A ?Quantitative and
Qualitative Disclosures About Market Risk? are deemed to be
forward-looking statements for purposes of the safe harbor.

The Partnership is in the business of speculative trading of
futures and forwards.  For a detailed description of the risks
that may affect the business of the Partnership, see the
discussion of risk factors as set forth in Item 7 ?Management?s
Discussion and Analysis of Financial Condition and Results of
Operations? and Item 7A ?Quantitative and Qualitative Disclosures
About Market Risk?.

Item 1B.  UNRESOLVED STAFF COMMENTS
Not applicable.

Item 2.  PROPERTIES
The Partnership?s executive and administrative offices are
located within the offices of Morgan Stanley DW.  The Morgan
Stanley DW offices utilized by the Partnership are located at 330
Madison Avenue, 8th Floor, New York, NY  10017.

Item 3.  LEGAL PROCEEDINGS
None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<page>
PART II
Item 5. MARKET FOR REGISTRANT'S PARTNERSHIP UNITS AND RELATED
        SECURITY HOLDER MATTERS

(a) Market Information.  There is no established public trading
market for Units of the Partnership.

(b) Holders.  The number of holders of Units at December 31,
2006, was approximately 2,591.

(c) Distributions.  No distributions have been made by the
Partnership since it commenced trading operations on February 1,
1991.  Demeter has sole discretion to decide what distributions,
if any, shall be made to investors in the Partnership.  Demeter
currently does not intend to make any distributions of the
Partnership?s profits.
<page> <table> Item 6.  SELECTED FINANCIAL DATA (in dollars)

<caption>






                                     For the Years Ended December 31,
                            2006         2005         2004        2003        2002



				<c>		<c>		<c>		<c>		<c>
Total Trading Results
including interest
income			    	(5,164,044)	(13,922,992) 13,717,596 	13,484,883	 31,602,392


Net Income (Loss)       (9,005,028)	(19,667,394)  6,760,313 	 3,785,066	 19,856,770


Net Income (Loss)
Per Unit (Limited
& General Partners)        (514.53)	    (870.58)	     315.31	    117.04	     667.07


Total Assets  	      34,699,103	 54,201,405  84,451,024 	85,290,955   89,797,463


Total Limited
Partners' Capital 	   	33,711,181   52,377,441  82,610,177	83,407,424   87,947,142


Net Asset Value
Per Unit                	  2,213.24     2,727.77	   3,598.35	  3,283.04     3,166.00
</table>




<page>
Item 7. 	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
		CONDITION AND RESULTS OF OPERATIONS

Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker, and MS&Co. and MSIL as
clearing brokers in separate futures and forwards trading
accounts established for the Trading Manager.  Such assets are
used as margin to engage in trading and may be used as margin
solely for the Partnership?s trading. The assets are held in
either non-interest bearing bank accounts or in securities and
instruments permitted by the Commodity Futures Trading Commission
for investment of customer segregated or secured funds.  Since
the Partnership?s sole purpose is to trade in futures and
forwards, it is expected that the Partnership will continue to
own such liquid assets for margin purposes.

The Partnership?s investment in futures and forwards may, from
time to time, be illiquid.  Most U.S. futures exchanges limit
fluctuations in prices during a single day by regulations
referred to as ?daily price fluctuations limits? or ?daily
limits?.  Trades may not be executed at prices beyond the daily
limit.  If the price for a particular futures contract has
increased or decreased by an amount equal to the daily limit,
positions in that futures contract can neither be taken nor
liquidated unless traders are willing to affect trades at or
within the limit.  Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
<page> trading.  These market conditions could prevent the
Partnership from promptly liquidating its futures contracts and
result in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies.  The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses.  Either of these market conditions could
result in restrictions on redemptions.  For the periods covered
by this report, illiquidity has not materially affected the
Partnership?s assets.

There are no known material trends, demands, commitments, events,
or uncertainties at the present time that are reasonably likely to
result in the Partnership?s liquidity increasing or decreasing in
any material way.

Capital Resources.  The Partnership does not have, nor does it
expect to have, any capital assets.  Redemptions of Units in the
future will affect the amount of funds available for investments
in futures and forwards in subsequent periods.  It is not
possible to estimate the amount, and therefore the impact, of
future outflows of Units.
<page> There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the
present time.


Results of Operations.
General.  The Partnership's results depend on the Trading Manager
and the ability of the Trading Manager's trading program to take
advantage of price movements in the futures and forwards markets.
The following presents a summary of the Partnership?s operations
for each of the three years in the period ended December 31,
2006, and a general discussion of its trading activities during
each period.  It is important to note, however, that the Trading
Manager trades in various markets at different times and that
prior activity in a particular market does not mean that such
market will be actively traded by the Trading Manager or will be
profitable in the future. Consequently, the results of operations
of the Partnership are difficult to discuss other than in the
context of the Trading Manager?s trading activities on behalf of
the Partnership during the period in question.  Past performance
is no guarantee of future results.

The Partnership?s results of operations set forth in the
Financial Statements are prepared in accordance with accounting
principles generally accepted in the United States of America,
which require the use of certain accounting policies that affect
<page> the amounts reported in these Financial Statements,
including the following: The contracts the Partnership trades are
accounted for on a trade-date basis and marked to market on a
daily basis. The difference between their cost and market value
is recorded on the Statements of Operations as ?Net change in
unrealized trading  profit (loss)? for open (unrealized)
contracts, and recorded as ?Realized trading profit (loss)? when
open positions are closed out.  The sum of these amounts
constitutes the Partnership?s trading results.  The market value
of a futures contract is the settlement price on the exchange on
which that futures contract is traded on a particular day.  The
value of a foreign currency forward contract, is based on the
spot rate as of the close of business.  Interest income, as well
as management fees, incentive fees, brokerage commissions, and
transaction fees and costs of the Partnership are recorded on an
accrual basis.

Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions relating to the application of
critical accounting policies other than those presently used could
reasonably affect reported amounts.

The Partnership recorded total trading results including interest
income totaling $(5,164,044) and expenses totaling $3,840,984,
resulting in a net loss of $9,005,028 for the year ended December
31, 2006. The Partnership?s net asset value per Unit decreased
<page> from $2,727.77 at December 31, 2005, to $2,213.24 at
December 31, 2006.  Total redemptions for the year were
$9,845,517 and the Partnership?s ending capital was $34,081,477
at December 31, 2006, a decrease of $18,850,545 from ending
capital at December 31, 2005, of $52,932,022.

The most significant trading losses of approximately 14.9% were
experienced in the currency markets from both long and short
positions in the Japanese yen as the value of the yen moved
without consistent direction during the first quarter on
uncertainty regarding future interest rate policy by the Bank of
Japan.  Long positions in the Australian dollar versus the U.S.
dollar incurred additional losses during June as the U.S. dollar
reversed higher amid diplomatic developments between the U.S. and
Iran regarding Iran?s nuclear research program. Further losses
were incurred during the third quarter from short and long
positions in the Swiss franc and the euro as the value of these
currencies experienced short-term volatile price movement.
During October, losses were incurred from short positions in the
euro, Japanese yen, and Swiss franc versus the U.S. dollar as the
value of the U.S. dollar declined towards the latter half of the
month after the U.S. Department of Commerce reported slower than
expected growth in third quarter U.S. Gross Domestic Product, as
well as a faster than expected decline in consumer core
inflation. Furthermore, the value of the U.S. dollar continued to
move lower after the U.S. Federal Reserve held interest rates
<page> steady on October 25. Additionally, the Japanese yen
strengthened after the Swiss National Bank said it had raised its
holdings of the Japanese currency, while the euro moved higher
after the IFO survey showed an unexpected increase in German
business confidence.  Meanwhile, the Swiss franc strengthened in
tandem with the euro. Finally, in December, losses were
experienced from long positions in the Swiss franc, euro, and
British pound versus the U.S. dollar as the value of the U.S.
dollar moved higher relative to these currencies due to renewed
optimism about the health of the U.S. economy.  Additional losses
of approximately 2.1% were incurred in the energy markets from
long futures positions in crude oil and its related products as
prices declined during February after an announcement by Chinese
government authorities that China would place an emphasis on
prospecting alternative energy sources in the future, reports of
larger than expected supplies, and mild winter weather in the
U.S. Northeast. Further losses in the energy markets were
recorded during March from short positions in the aforementioned
markets as prices strengthened early in the month on supply fears
fueled by news of geopolitical tensions in Nigeria and Iran.
Elsewhere in the energy markets, losses were incurred during
March from short positions in natural gas futures as prices
advanced on news from the U.S. Department of Energy that domestic
reserves were lower than expected.   In November, losses were
experienced in the energy markets from short positions in gas oil
and crude oil futures as prices rose on supply concerns after a
<page> major Nigerian facility ceased production following a
hostage situation, and BP?s Prudhoe Bay, Alaska facility
experienced a pipeline delay.  Prices continued to move higher
amid concern over OPEC's production cut after the U.S. Department
of Energy reported a sharp fall in domestic inventories of
distillate products.  Smaller losses were incurred, during
November, from short positions in natural gas futures as prices
reversed higher on colder temperatures forecasted in the U.S. and
expectations of a decline in domestic inventories.  Partnership
losses of approximately 1.9% were recorded in the agricultural
complex, during the second quarter, from long positions in
soybean and coffee futures as soybean prices reversed lower on
news that supplies would increase and U.S. exports would
decrease, while coffee prices moved lower after estimates that
Brazil?s coffee crop was larger than expected.  Further losses in
the agricultural complex were incurred towards the end of June
from short positions in wheat, soybean, and corn futures as
prices reversed higher amid reports of stronger demand and large
volumes of speculative buying. Losses were also recorded during
July and August from long positions in wheat and corn futures as
prices fell amid favorable weather in the U.S. wheat and corn
belts, while losses were recorded from short positions in coffee
futures as prices increased at the beginning of August on news of
potential for a drought during Brazil's coffee-blooming season
and expectations of higher demand.  Finally in December,
additional losses were incurred from long positions in soybean
<page> and wheat futures as prices moved lower after news that
exports had slumped and favorable weather in the southern Great
Plains that boosted prospects for the winter crop.  A portion of
the Partnership?s overall losses for the year was offset by gains
of approximately 2.7% that were recorded in the metals sector
from long positions in copper, aluminum, and zinc futures as
prices rallied sharply to record highs amid strong global
industrial demand from the U.S., China, and India.  Elsewhere in
the metals markets, gains were also recorded from long futures
positions in gold and silver as prices moved higher, primarily
during the first half of the year, on continued geopolitical
concerns regarding Iran?s nuclear program, inflation concerns due
to high oil prices, and U.S. persistent demands from foreign
central banks.  Within the global stock index sector, gains of
approximately 0.9% were experienced during first quarter from
long positions in European, U.S., and Pacific Rim stock index
futures as equity prices trended higher on strong corporate
earnings and solid economic data.  Long positions in European
equity index futures also experienced gains during September as
prices rose amid falling oil prices, merger and acquisition
activity, and solid corporate earnings.  Further gains in the
global stock index market were experienced during October from
long positions in U.S., European, and Australian stock index
futures as prices advanced amid declining energy prices and
favorable government reports, which showed few signs of increased
global inflationary pressure. Finally, U.S. equity index futures
<page> prices increased after the U.S. Federal Reserve?s decision
to hold interest rates steady. Smaller gains of approximately
0.2% were experienced in the global fixed-income sector,
primarily during March and April, from short positions in
European and U.S. fixed-income futures as prices trended lower
amid rising equity prices and strong economic data out of the
Euro-Zone, while U.S. fixed-income prices declined on investor
sentiment that the U.S. Federal Reserve would continue to
increase interest rates in order to combat inflation. U.S. fixed-
income prices also moved lower following the release of stronger
than expected economic data. Further profits in the global fixed-
income sector were incurred during August from long positions in
Japanese, U.S., and German fixed-income futures as prices
increased on higher demand amid concerns of a slowing global
economy and geopolitical tensions.

The Partnership recorded total trading results including interest
income totaling $(13,922,992) and expenses totaling $5,744,402,
resulting in a net loss of $19,667,394 for the year ended
December 31, 2005.  The Partnership?s net asset value per Unit
decreased from $3,598.35 at December 31, 2004, to $2,727.77 at
December 31, 2005.  Total redemptions for the year were
$11,048,198 and the Partnership?s ending capital was $52,932,022
at December 31, 2005, a decrease of $30,715,592 from ending
capital at December 31, 2004, of $83,647,614.

<page> The most significant trading losses of approximately 14.9%
resulted in the currency markets throughout the first and third
quarters from positions in a variety of foreign currencies, such
as the British pound, Swiss franc, euro, Czech koruna, Norwegian
krone, South African rand, and both the Australian and New
Zealand dollars, versus the U.S. dollar.  During January, long
European currency positions against the U.S. dollar resulted in
losses after the U.S. dollar?s value reversed sharply higher amid
conflicting economic data and speculation for higher U.S.
interest rates.  Losses during February were recorded from newly
established short European currency positions against the U.S.
dollar after the U.S. dollar weakened due to comments by U.S.
Federal Reserve Chairman Alan Greenspan regarding the
considerable U.S. Current-Account deficit and the U.S. dependence
on foreign investment.  During March, losses resulted from long
European currency positions versus the U.S. dollar after the U.S.
dollar reversed sharply higher due to an increase in U.S.
interest rates and concerns for inflation.  During August, long
U.S. dollar positions against the British pound and Swiss franc
resulted in losses as the value of the U.S. dollar declined amid
higher crude oil prices, lower durable goods orders, the U.S.
trade imbalance, and economic warnings from U.S. Federal Reserve
Chairman Alan Greenspan.  During September, losses were recorded
from short U.S. dollar positions against the British pound, Swiss
franc, and euro as the value of the U.S. dollar advanced amid
bolstered expectations that the U.S. Federal Reserve would <page>
continue to raise interest rates.  Meanwhile, the British pound
weakened on expectations for further interest rate cuts by the
Bank of England.  In addition, the values of the Swiss franc and
euro moved lower amid weaker growth forecasts for the European
economy and developments of political uncertainty stemming from
news that Germany?s incumbent Chancellor, Gerhard Schroeder,
would not concede defeat to the opposition leader Angela Merkel
in the days after the election.  Partnership losses of
approximately 8.6% were recorded in the global interest rate
markets during February from long positions in U.S., European,
and Japanese interest rate futures as prices reversed lower after
positive economic data and expectations for higher interest rates
reduced investor demand for fixed-income investments.  Short
positions in European and Japanese interest rate futures held
during March also recorded losses after prices strengthened amid
overall weakness in global equity markets.  During July, losses
resulted from long positions in U.S., European, and Japanese
interest rate futures as prices reversed lower.  European fixed-
income prices declined amid strength in regional equity markets,
and news of terrorist attacks on the London transport network.
Long U.S. interest rate futures positions experienced losses as
prices declined following a rise in interest rates and after the
U.S. Labor Department released its June employment report.
Within the Japanese interest rate markets, losses were recorded
as prices declined following positive economic comments by the
Japanese Ministry of Finance.  During August, short positions in
<page> U.S., Japanese, and European fixed-income futures incurred
losses as prices reversed higher on worries about the global
economic impact of Hurricane Katrina.  Prices for U.S. interest
rate futures also rallied on growing speculation that the U.S.
Federal Reserve might stop raising interest rates sooner than
previously thought.  Within the Japanese interest rate futures
markets, a bigger than expected decline in Japanese industrial
output for July, also contributed to higher prices.  Long
positions in U.S. and European fixed-income futures held during
September incurred losses as prices weakened after measurements
of Hurricane Katrina?s economic impact revealed that it was not
serious enough to deter the U.S. Federal Reserve from its policy
of raising interest rates.  European fixed-income prices also
fell in response to expectations that European Central Bank
representatives would leave European interest rates unchanged,
despite the fact that European Central Bank representatives had
openly discussed the eventual need to hike rates due to concern
for inflation risks.  Additional losses stemmed from long
positions in Australian bond futures.  During the fourth quarter,
losses resulted from short futures positions in global interest
rate futures as fixed-income prices reversed higher amid reduced
expectations for further increases in interest rates by central
banks.  In the energy markets, losses of approximately 4.5% were
incurred in the energy markets primarily during the second and
fourth quarters from long futures positions in crude oil and its
related products, as well as in natural gas, after prices <page>
declined amid a reduction in demand, an economic slowdown in
parts of the U.S. affected by Hurricanes Katrina and Rita, and
reports that more refineries in the U.S. Gulf region had resumed
operations at full capacity.  Prices continued to decline during
October as supply worries eased on signs of adequate fuel stocks
in the U.S.  Also impacting long futures positions in natural gas
was a sharp price reversal during December caused by weak demand,
mild weather in Europe and the U.S., and the release of the U.S.
government data which showed a smaller than expected decline in
supplies.  Newly established short futures positions in crude oil
and its related products held during December also incurred
losses after prices finished higher on news of a rebound in
energy demand.  Additional losses of approximately 1.4% were
incurred in the metals markets throughout a majority of the year
from positions in precious metals futures as gold and silver
prices fluctuated, driven by volatility in the U.S. dollar, as
well as supply and demand concerns.  In the agricultural markets,
losses of approximately 1.4% resulted during the second quarter
from futures positions in cocoa and corn as prices traded
inconsistently in response to technically-based trading activity
and supply and demand concerns.  Long futures positions in wheat
held during April also resulted in losses after prices fell in
response to favorable weather in growing regions and reduced
foreign demand. Futures positions in cotton also experienced
losses as prices moved lower during May on supply increases and
then reversed higher during June amid weather-related concerns.
<page> During the fourth quarter, long futures positions in
cotton resulted in losses as prices reversed lower in response to
weaker demand.  Short futures positions in corn, soybeans, and
its related products established later in the quarter also
incurred losses.  A portion of the Partnership?s overall losses
for the year was offset by gains of approximately 2.4% achieved
in the global stock index markets during the third and fourth
quarters from long positions in Japanese stock index futures as
prices increased amid the release of positive Japanese economic
data, falling energy prices, and investor optimism for continued
improvement in the Japanese economy during 2006.

The Partnership recorded total trading results including interest
income totaling $13,717,596 and expenses totaling $6,957,283,
resulting in net income of $6,760,313 for the year ended December
31, 2004.  The Partnership?s net asset value per Unit increased
from $3,283.04 at December 31, 2003, to $3,598.35 at December 31,
2004.  Total redemptions for the year were $7,466,653 and the
Partnership?s ending capital was $83,647,614 at December 31,
2004, a decrease of $706,340 from ending capital at December 31,
2003, of $84,353,954.


The most significant trading gains of approximately 22.6% were
recorded in the energy markets from long futures positions in
crude oil and its related products.  During the first quarter,
long positions continued to benefit as prices increased in <page>
response to declining supplies, falling inventory levels, a
production cut by OPEC, and fears of supply disruptions following
the Madrid train bombings. During April, long positions benefited
as prices trended higher on fears of potential terrorist activity
in the Middle East and news of refinery problems.  During the
third quarter, long positions profited as prices continued to
trend higher due to supply and geopolitical concerns.  Additional
gains were generated from long positions in natural gas futures
as prices strengthened during the second quarter amid higher
crude oil prices and news of decreased supply.  Gains of
approximately 7.9% were recorded in the global interest rate
markets from long positions in European and U.S. interest rate
futures.  Positions profited during the first quarter as
unimpressive economic data and weak global inflation caused bond
prices to rally.  Additional gains resulted during the third
quarter from advancing prices supported by a surge in oil prices,
a drop in equity prices, and a conflicted U.S. economic outlook.
During September, long positions continued to profit as prices
trended higher amid strengthening energy prices, concerns for
U.S. economic growth, and reduced expectations for higher
interest rates.  Gains also resulted during the fourth quarter as
prices moved higher due to U.S. economic growth concerns. Smaller
Partnership gains of approximately 1.2% resulted in the
agricultural markets, primarily during the first quarter, from
long futures positions in corn, soybeans, and soybean-related
products as prices climbed higher due to increased exports abroad
<page> and greater demand from Asia.  A portion of the
Partnership?s overall gains for the year was offset by losses of
approximately 11.1% experienced in the currency markets.  During
March, short Japanese yen positions incurred losses as the yen
reversed higher due to speculation that the Bank of Japan had
relaxed its currency intervention efforts. During April, long
Japanese yen, British pound, and South African rand positions
versus the U.S. dollar incurred losses as the U.S. dollar surged
following the release of stronger than expected U.S. economic
data.  The yen also came under pressure following weakening
efforts by the Japanese government through currency market
intervention activity.  During May, short positions in the yen,
pound, and rand experienced further losses as the U.S. dollar?s
value declined amid fears of potential terrorist attacks,
expanding energy prices, and the release of weaker than expected
U.S. economic data.  During June, losses were experienced from
short yen positions as it moved higher in response to better than
anticipated Japanese economic data and speculation for increases
in Japanese interest rates.  Additional losses resulted during
June from long pound positions against the U.S. dollar as the
U.S. dollar reversed higher during June amid expectations that
the U.S. Federal Reserve would aggressively raise U.S. interest
rates.  During July, long yen positions experienced losses as the
U.S. dollar advanced amid a jump in July the U.S. consumer
confidence data.  During August, losses resulted from short yen
positions as the U.S. dollar?s value declined amid concerns for
<page> U.S. economic growth.  During September, short British
pound positions versus the U.S. dollar resulted in losses as the
U.S. dollar?s value declined because of rising oil prices and
continued concern for U.S. economic growth. In the global stock
index markets, losses of approximately 6.0% resulted from
positions in Japanese and European equity index futures.  During
the second quarter, geopolitical concerns and expanding energy
prices caused global equity prices to fall and long positions to
finish with losses.  Newly established short positions also
experienced losses as prices rebounded amid a decline in oil
prices and strong corporate earnings.  Long positions also
incurred losses during the third quarter as prices reversed lower
due to the release of disappointing U.S. employment data,
advancing energy prices, and new warnings for potential terrorist
attacks.  Losses of approximately 3.3% in the metals markets
resulted during the second quarter, from long industrial metals
futures positions as prices reversed lower amid weakened Asian
demand and an increase in the U.S. dollar.  Short precious metals
positions incurred losses during the second quarter as prices
increased amid demand generated by a weaker U.S. dollar and fears
of potential terrorist attacks.  During the third quarter, losses
were also incurred from long precious metals positions as prices
fell amid a rebound in the U.S. dollar and news of strong U.S.
employment data.

<page> For an analysis of unrealized gains and (losses) by
contract type and a further description of 2006 trading results,
refer to the  Partnership?s Annual Report to Limited Partners for
the year ended December 31, 2006, which is incorporated by
reference to Exhibit 13.01 of this Form 10-K.

The Partnership's gains and losses are allocated among its
partners for income tax purposes.

Off-Balance Sheet Arrangements and Contractual Obligations.
The Partnership does not have any off-balance sheet arrangements,
nor does it have contractual obligations or commercial
commitments to make future payments that would affect its
liquidity or capital resources.

Market Risk.
The Partnership is a party to financial instruments with elements
of off-balance sheet market and credit risk.  The Partnership
trades futures and forward contracts on physical commodities and
other commodity interests, including, but not limited to, foreign
currencies, financial instruments, metals, energy, and
agricultural products.  In entering into these contracts, the
Partnership is subject to the market risk that such contracts may
be significantly influenced by market conditions, such as
interest rate volatility, resulting in such contracts being less
valuable.  If the markets should move against all of the <page>
positions held by the Partnership at the same time, and the
Trading Manager was unable to offset positions of the
Partnership, the Partnership could lose all of its assets and
limited partners would realize a 100% loss.

In addition to the Trading Manager's internal controls, the
Trading Manager must comply with the Partnership?s trading
policies that include standards for liquidity and leverage that
must be maintained.  The Trading Manager and Demeter monitor the
Partnership's trading activities to ensure compliance with the
trading policies and Demeter can require the Trading Manager to
modify positions of the Partnership if Demeter believes they
violate the Partnership's trading policies.

Credit Risk.
In addition to market risk, in entering into futures and forward
contracts there, is a credit risk to the Partnership that the
counterparty on a contract will not be able to meet its
obligations to the Partnership.  The ultimate counterparty or
guarantor of the Partnership for futures and forward contracts,
traded in the United States and most foreign exchanges on which
the Partnership trades is the clearinghouse associated with such
exchange.  In general, a clearinghouse is backed by the
membership of the exchange and will act in the event of non-
performance by one of its members or one of its member?s
customers, which should significantly reduce this credit risk.
<page> There is no assurance that a clearinghouse, exchange, or
other exchange member will meet its obligations to the
Partnership, and Demeter and the commodity brokers will not
indemnify the Partnership against a default by such parties.
Further, the law is unclear as to whether a commodity broker has
any obligation to protect its customers from loss in the event of
an exchange or clearinghouse defaulting on trades affected for
the broker?s customers.  In cases where the Partnership trades
off-exchange forward contracts with a counterparty, the sole
recourse of the Partnership will be the forward contract?s
counterparty.

Demeter deals with these credit risks of the Partnership in
several ways.  First, Demeter monitors the Partnership?s credit
exposure to each exchange on a daily basis.  The commodity
brokers inform the Partnership, as with all their customers, of
the Partnership?s net margin requirements for all its existing
open positions, and Demeter has installed a system which permits
it to monitor the Partnership?s potential net credit exposure,
exchange by exchange, by adding the unrealized trading gains on
each exchange, if any, to the Partnership?s margin liability
thereon.

Second, the Partnership?s trading policies limit the amount of its
Net Assets that can be committed at any given time to futures
contracts and require a minimum amount of diversification in the
<page> Partnership?s trading, usually over several different
products and exchanges.  Historically, the Partnership?s exposure
to any one exchange has typically amounted to only a small
percentage of its total Net Assets and on those relatively few
occasions where the Partnership?s credit exposure climbs above
such level, Demeter deals with the situation on a case by case
basis, carefully weighing whether the increased level of credit
exposure remains appropriate.  Material changes to the trading
policies may be made only with the prior written approval of the
limited partners owning more than 50% of Units then outstanding.

Third, with respect to forward contract trading, the Partnership
trades with only those counterparties which Demeter, together with
Morgan Stanley DW, have determined to be creditworthy.  The
Partnership presently deals with MS&Co. as the sole counterparty
on forward contracts.

For additional information, see the ?Financial Instruments?
section under ?Notes to Financial Statements? in the Partnership?s
Annual Report to Limited Partners for the year ended December 31,
2006, which is incorporated by reference to Exhibit 13.01 of in
this Form 10-K.

Inflation has not been a major factor in the Partnership?s
operations.

<page>
New Accounting Developments.
In July 2006, the Financial Accounting Standards Board (?FASB?)
issued Interpretation No. 48, ?Accounting for Uncertainty in
Income Taxes ? an interpretation of FASB Statement 109? (?FIN
48?).  FIN 48 clarifies the accounting for income taxes by
prescribing the minimum recognition threshold a tax position must
meet before being recognized in the financial statements.  FIN 48
is effective for fiscal years beginning after December 15, 2006.
The impact to the Partnership?s Financial Statements, if any, is
currently being assessed.

In September 2006, the FASB issued SFAS No. 157, ?Fair Value
Measurements? (?SFAS No. 157?). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS No. 157 is
effective for the Partnership as of January 1, 2008. The impact
to the Partnership?s Financial Statements, if any, is currently
being assessed.

In September 2006, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 108, ?Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements? (?SAB No. 108?) to provide
guidance on how the effects of the carryover or reversal of prior
year unrecorded misstatements should be considered in quantifying
<page> a current year misstatement.  SAB No. 108 requires a
company to apply an approach that considers the amount by which
the current year income statement is misstated (?rollover
approach?) and an approach that considers the cumulative amount
by which the current year balance sheet is misstated (?iron-
curtain approach?).  Prior to the issuance of SAB No. 108, many
companies applied either the rollover or iron-curtain approach
for purposes of assessing materiality of misstatements.  SAB No.
108 is effective for the Partnership as of January 1, 2007.  Upon
adoption, SAB No. 108 allows a one-time cumulative effect
adjustment against Partners? Capital for those prior year
misstatements that were not material under the Partnership?s
prior approach, but are deemed material under the SAB No. 108
approach.  Demeter does not expect the adoption of SAB No. 108 to
have a material impact on the Partnership?s Financial Statements.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures and forwards. The market-sensitive
instruments held by the Partnership are acquired for speculative
trading purposes only and, as a result, all or substantially all
of the Partnership?s assets are at risk of trading loss.  Unlike
an operating company, the risk of market-sensitive instruments is
inherent to the primary business activity of the Partnership.

<page> The futures and forwards traded by the Partnership involve
varying degrees of related market risk.  Market risk is often
dependent upon changes in the level or volatility of interest
rates, exchange rates, and prices of financial instruments and
commodities, factors that result in frequent changes in the fair
value of the Partnership?s open positions, and consequently in
its earnings, whether realized or unrealized, and cash flow.
Gains and losses on open positions of exchange-traded futures and
exchange-traded forward contracts are settled daily through
variation margin. Gains and losses on off-exchange-traded forward
currency contracts are settled upon termination of the contract.
However, the Partnership is required to meet margin requirements
equal to the net unrealized loss on open forward currency
contracts in the Partnership accounts with the counterparty,
which is accomplished by daily maintenance of the cash balance in
a custody account held at Morgan Stanley DW for the benefit of
MS&Co.

The Partnership?s total market risk may increase or decrease as
it is influenced by a wide variety of factors, including, but not
limited to, the diversification among the Partnership?s open
positions, the volatility present within the markets, and the
liquidity of the markets.

The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin <page>
requirements.  Margin requirements generally range between 2% and
15% of contract face value.  Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership typically to be many times the total
capitalization of the Partnership.

The Partnership?s past performance is no guarantee of its future
results.  Any attempt to numerically quantify the Partnership?s
market risk is limited by the uncertainty of its speculative
trading.  The Partnership?s speculative trading and use of
leverage may cause future losses and volatility (i.e., ?risk of
ruin?) that far exceed the Partnership?s experiences to date
under the ?Partnership?s Value at Risk in Different Market
Sectors? section and significantly exceed the Value at Risk
(?VaR?) tables disclosed.

Limited partners will not be liable for losses exceeding the
current net asset value of their investment.

Quantifying the Partnership?s Trading Value at Risk
The following quantitative disclosures regarding the Partner-
ship?s market risk exposures contain ?forward-looking statements?
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
<page> 1934).  All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Partnership accounts for open positions on the basis of mark
to market accounting principles.  Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings and cash flow.

The Partnership?s risk exposure in the market sectors traded by
the Trading Manager is estimated below in terms of VaR. The
Partnership estimates VaR using a model based upon historical
simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio.  The VaR model takes into account
linear exposures to risks including equity and commodity prices,
interest rates, foreign exchange rates, and correlation among
these variables. The hypothetical changes in portfolio value are
based on daily percentage changes observed in key market indices
or other market factors (?market risk factors?) to which the
portfolio is sensitive.  The one-day 99% confidence level of the
Partnership?s VaR corresponds to the negative change in portfolio
value that, based on observed market risk factors, would have been
exceeded once in 100 trading days, or one day in 100.  VaR
typically does not represent the worst case outcome.  Demeter uses
approximately four years of daily market data (1,000 observations)
and re-values its portfolio (using delta-gamma approximations) for
<page> each of the historical market moves that occurred over this
time period.  This generates a probability distribution of daily
?simulated profit and loss? outcomes.  The VaR is the appropriate
percentile of this distribution.  For example, the 99% one-day VaR
would represent the 10th worst outcome from Demeter?s simulated
profit and loss series.

The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and do not distinguish between exchange and non-exchange
dealer-based instruments.  They are also not based on exchange
and/or dealer-based maintenance margin requirements.

VaR models, including the Partnership?s, are continually evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve.  Please note that the VaR model
is used to numerically quantify market risk for historic
reporting purposes only and is not utilized by either Demeter or
the Trading Manager in their daily risk management activities.
Please further note that VaR as described above may not be
comparable to similarly-titled measures used by other entities.

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total Net Assets
by primary market risk category at December 31, 2006 and 2005. At
<page> December 31, 2006 and 2005, the Partnership?s total
capitalization was approximately $34 million and $53 million,
respectively.
Primary Market          December 31, 2006   December 31, 2005
Risk Category             Value at Risk       Value at Risk
Currency                		(3.43)%			(1.48)%

Interest Rate      			(1.45)              (1.35)

Equity                    	(0.72)   	 		(1.12)

Commodity                	(0.68)   			(0.82)

Aggregate Value at Risk   	(3.76)%		 	(2.48)%


The VaR for a market category represents the one-day downside risk
for the aggregate exposures associated with this market category.
The Aggregate Value at Risk listed above represents the VaR of the
Partnership?s open positions across all the market categories, and
is less than the sum of the VaRs for all such market categories
due to the diversification benefit across asset classes.

Because the business of the Partnership is the speculative trading
of futures and forwards, the composition of its trading portfolio
can change significantly over any given time period, or even
within a single trading day.  Such changes could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the December 31, 2006, VaR set forth
above by presenting the Partnership?s high, low, and average VaR,
<page> as a percentage of total Net Assets for the four quarter-
end reporting periods from January 1, 2006, through December 31,
2006.
Primary Market Risk Category        High        Low      Average
Currency         				(3.43)%	   0.81%	    1.72%
Interest Rate                     	(3.87)	  (1.45)	   (2.36)
Equity                             (0.85)	  (0.40)	   (0.65)
Commodity                         	(1.10)	  (0.50)	   (0.81)
Aggregate Value at Risk            (3.76)%	  (1.77)%	   (3.10)%

Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio?s aggregate market
risk exposure, incorporating a range of varied market risks,
reflect risk reduction due to portfolio diversification or
hedging activities, and can cover a wide range of portfolio
assets.  However, VaR risk measures should be viewed in light of
the methodology?s limitations, which include, but may not be
limited to the following:
*	past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
*	changes in portfolio value caused by market movements may
differ from those of the VaR model;
*	VaR results reflect past market fluctuation applied to
current trading positions while future risk depends on future
positions;
<page>
*	VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
*	the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.

In addition, the VaR tables above, as well as the past
performance of the Partnership, give no indication of the
Partnership?s potential ?risk of ruin?.

The VaR tables provided present the results of the Partnership?s
VaR for each of the Partnership?s market risk exposures and on an
aggregate basis at December 31, 2005, and for the four quarter-
end reporting periods during calendar year 2006.  VaR is not
necessarily representative of the Partnership?s historic risk,
nor should it be used to predict the Partnership?s future
financial performance or its ability to manage or monitor risk.
There can be no assurance that the Partnership?s actual losses on
a particular day will not exceed the VaR amounts indicated above
or that such losses will not occur more than once in 100 trading
days.



<page>
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances.  These balances and any market risk they may represent
are immaterial.

The Partnership also maintains a substantial portion of its
available assets in cash at Morgan Stanley DW; as of December 31,
2006, such amount is equal to approximately 91% of the
Partnership?s net asset value.  A decline in short-term interest
rates would result in a decline in the Partnership?s cash
management income.  This cash flow risk is not considered to be
material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s Net
Assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures ? except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - <page>
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act.  The Partnership?s primary market risk
exposures, as well as the strategies used and to be used by
Demeter and the Trading Manager for managing such exposures, are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership?s
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expro-
priations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation, and many other factors could result in
material losses, as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at December 31, 2006, by market sector.  It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency.  The largest market exposure of the Partnership at
December 31, 2006, was to the currency sector.  The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
<page> fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs.
Interest rate changes, as well as political and general economic
conditions influence these fluctuations.  At December 31, 2006,
the Partnership?s exposure was mostly to outright U.S. dollar
positions.  Outright positions consist of the U.S. dollar vs.
other currencies.  These other currencies include major and minor
currencies.  Demeter does not anticipate that the risk associated
with the Partnership?s currency trades will change significantly
in the future.

Interest Rate.  The second largest market exposure of the
Partnership as of December 31, 2006, was to the global interest
rate sector.  This exposure was primarily spread across U.S.,
Japanese, European, and Australian interest rate sectors.
Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and
indirectly affect the value of its stock index and currency
positions.  Interest rate movements in one country, as well as
relative interest rate movements between countries, materially
impact the Partnership?s profitability. The Partnership?s primary
interest rate exposure is generally to interest rate fluctuations
in the U.S. and the other G-7 countries? interest rates.  The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada.  However, the Partnership also takes futures
positions in the government debt of smaller countries - e.g.,
Australia.  Demeter anticipates that the G-7 countries interest
<page> rates and Australian interest rates will remain the
primary interest rate exposure of the Partnership for the
foreseeable future.  The speculative futures positions held by
the Partnership may range from short to long-term instruments.
Consequently, changes in short, medium, or long-term interest
rates may have an effect on the Partnership.

Equity.  At December 31, 2006, the Partnership had market
exposure to the global stock index sector, primarily equity price
risk in the G-7 countries.  The stock index futures traded by the
Partnership are by law limited to futures on broadly-based
indices.  At December 31, 2006, the Partnership?s primary
exposures were to the NIKKEI 225 (Japan), Euro Stoxx 50 (Europe),
NASDAQ 100 (U.S.), and SPI 200 (Australia) stock indices.  The
Partnership is exposed to the risk of adverse price trends or
static markets in the U.S., European, and Japanese stock indices.
Static markets would not cause major market changes, but would
make it difficult for the Partnership to avoid trendless price
movements resulting in numerous small losses.

Commodity.
Energy.  The third largest market exposure of the
Partnership at December 31, 2006, was in the energy sector
to futures contracts in crude oil and its related products,
and natural gas.  Price movements in these markets result
from geopolitical developments, particularly in the Middle
East, as well as weather patterns, and other economic <page>
fundamentals.  Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in the future.  Natural gas has exhibited
volatility in prices resulting from weather patterns and
supply and demand factors and will likely continue in this
choppy pattern.

Soft Commodities and Agriculturals.  At December 31, 2006,
the Partnership had market exposure to the markets that
comprise these sectors.  Most of the exposures were to the
coffee, sugar, corn, cotton, and soybean oil markets.  Supply
and demand inequalities, severe weather disruptions, and
market expectations affect price movements in these markets.

Metals.  At December 31, 2006, the Partnership had market
exposure in the metals sector to fluctuations in the price of
precious metals, such as gold and silver, and base metals,
such as aluminum and copper.  Economic forces, supply and
demand inequalities, geopolitical factors, and market
expectations influence price movements in these markets.  The
Trading Manager utilizes trading system(s) to take positions
when market opportunities develop, and Demeter anticipates
that the Partnership will continue to do so.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at December 31, 2006:
<page>
Foreign Currency Balances. The Partnership?s primary foreign
currency balances at December 31, 2006, were in euros,
Australian dollars, British pounds, Canadian dollars, Swiss
francs, and Japanese yen.  The Partnership controls the non-
trading risk of foreign currency balances by regularly
converting them back into U.S. dollars upon liquidation of
their respective positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Manager, separately, attempt to
manage the risk of the Partnership?s open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership?s assets among different market sectors and trading
approaches, and by monitoring the performance of the Trading
Manager daily. In addition, the Trading Manager establishes
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.

Demeter monitors and controls the risk of the Partnership?s non-
trading instrument, cash.  Cash is the only Partnership
investment directed by Demeter, rather than the Trading Manager.


<page>
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are incorporated by reference to the
Partnership's Annual Report, which is filed as Exhibit 13.01
hereto.


Supplementary data specified by Item 302 of Regulation S-K:

             Summary of Quarterly Results (Unaudited)


Quarter   Total Trading Results        Net          Net Income/
Ended   including interest income  Income/(Loss)  (Loss) Per Unit

2006
March 31        $(3,573,495)       $(4,773,134)       $(244.98)
June 30             374,599           (534,288)         (40.76)
September 30        697,061           (187,449)          (8.31)
December 31      (2,662,209)        (3,510,157)        (220.48)

Total           $(5,164,044)       $(9,005,028)       $(514.53)



2005
March 31        $(14,187,293)     $(15,907,974)       $(685.98)
June 30              536,752          (970,737)         (38.93)
September 30       1,126,913          (266,870)         (12.89)
December 31       (1,399,364)       (2,521,813)        (132.78)

Total           $(13,922,992)     $(19,667,394)       $(870.58)



Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
	  AND FINANCIAL DISCLOSURE

None.




<page>
Item 9A.  CONTROLS AND PROCEDURES
(a)	As of the end of the period covered by this annual report,
the President and Chief Financial Officer of Demeter, the
general partner of the Partnership, have evaluated the
effectiveness of the Partnership?s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of
the Exchange Act), and have judged such controls and
procedures to be effective.

     (b)	There have been no material changes during the period
covered by this annual report in the Partnership?s internal
control over financial reporting (as defined in Rules 13a-
15(f) and 15d-15(f) of the Exchange Act) or in other factors
that could significantly affect these controls subsequent to
the date of their evaluation.

Management?s Report on Internal Control Over Financial Reporting
Demeter is responsible for the management of the Partnership.

Management of Demeter (?Management?) is responsible for
establishing and maintaining adequate internal control over
financial reporting.  The internal control over financial
reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
<page> Financial Statements for external purposes in accordance
with generally accepted accounting principles.

The Partnership?s internal control over financial reporting
includes those policies and procedures that:

*	Pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Partnership;

*	Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of Financial Statements
in accordance with generally accepted accounting principles,
and that the Partnership?s  transactions are being made only
in accordance with authorizations of Management and
directors; and

*	Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
the Partnership?s assets that could have a material effect
on the Financial Statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
<page> inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.

Management assessed the effectiveness of the Partnership?s
internal control over financial reporting as of December 31,
2006.  In making this assessment, Management used the criteria
set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control-Integrated Framework.
Based on our assessment and those criteria, Management believes
that the Partnership maintained effective internal control over
financial reporting as of December 31, 2006.

Deloitte & Touche LLP, the Partnership?s independent registered
public accounting firm, has issued an attestation report on
Management?s assessment of the Partnership?s internal control
over financial reporting and on the effectiveness of the
Partnership?s internal control over financial reporting.  This
report, which expresses an unqualified opinion on Management?s
assessment and on the effectiveness of the Partnership?s internal
control over financial reporting, appears under ?Report of
Independent Registered Public Accounting Firm? in the
Partnership?s Annual Report to Limited Partners for the year
ended December 31, 2006.


<page>
Item 9B.  OTHER INFORMATION
None.


<page> PART III

Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

There are no directors or executive officers of the Partnership.
The Partnership is managed by Demeter, its general partner.


Directors and Officers of the General Partner
The directors and executive officers of Demeter are as follows:

Effective May 1, 2006, Mr. Walter Davis, age 41, is a Director,
Chairman of the Board of Directors, and President of Demeter.
Mr. Davis is an Executive Director of Morgan Stanley and the
Director of Morgan Stanley?s Managed Futures Department.  Prior
to joining Morgan Stanley in 1999, Mr. Davis worked for Chase
Manhattan Bank?s Alternative Investment Group.  Throughout his
career, Mr. Davis has been involved with the development,
management, and marketing of a diverse array of commodity pools,
hedge funds, and other alternative investment funds.  Mr. Davis
received an MBA in Finance and International Business from the
Columbia University Graduate School of Business in 1992 and a
B.A. in Economics from the University of the South in 1987.

Effective December 5, 2002, Mr. Frank Zafran, age 51, is a
Director of Demeter.  Mr. Zafran is a Managing Director of Morgan
Stanley and, in November 2005, was named Managing Director of
Wealth Solutions. Previously, Mr. Zafran was Chief Administrative
Officer of Morgan Stanley?s Client Solutions Division. Mr. Zafran
<page> joined the firm in 1979 and has held various positions in
Corporate Accounting and the Insurance Department, including
Senior Operations Officer ? Insurance Division, until his
appointment in 2000 as Director of Retirement Plan Services,
responsible for all aspects of 401(k) Plan Services, including
marketing, sales, and operations.  Mr. Zafran received a B.S.
degree in Accounting from Brooklyn College, New York.

Effective March 31, 2003, Mr. Douglas J. Ketterer, age 41, is a
Director of Demeter.  Mr. Ketterer is a Managing Director of
Morgan Stanley and is head of Morgan Stanley?s Managed Money
Group.  The Managed Money Group is comprised of a number of
departments (including the Alternative Investments Group,
Consulting Services Group, and Mutual Fund Department) which
offer products and services through Morgan Stanley?s Global
Wealth Management Group.  Mr. Ketterer joined Morgan Stanley in
1990 and has served in many roles in the corporate
finance/investment banking, asset management, and distribution
divisions of the firm. Mr. Ketterer received his MBA from New
York University?s Leonard N. Stern School of Business and his
B.S. in Finance from the University at Albany?s School of
Business.

Effective May 1, 2005, Mr. Harry Handler, age 48, is a Director
of Demeter. Mr. Handler serves as an Executive Director of Morgan
Stanley?s Global Wealth Management Group.  Mr. Handler works in
<page> Morgan Stanley?s Capital Markets Division as Equity Risk
Officer. Additionally, Mr. Handler also serves as Chairman of the
Morgan Stanley DW Best Execution Committee and manages the Global
Wealth Management Group?s Stock Lending business.  In his prior
position, Mr. Handler was a Systems Director in Information
Technology, in charge of Equity and Fixed Income Trading Systems
along with the Special Products, such as Unit Trusts, Managed
Futures, and Annuities.  Prior to his transfer to the Information
Technology Area, Mr. Handler managed the Foreign Currency and
Precious Metals Trading Desk for Dean Witter, a predecessor
company to Morgan Stanley.  He also held various positions in the
Futures Division where he helped to build the Precious Metals
Trading Operation of Dean Witter.  Before joining Dean Witter,
Mr. Handler worked at Mocatta Metals as an Assistant to the
Chairman. His roles at Mocatta Metals included stints on the
Futures Order Entry Desk and the Commodities Exchange Trading
Floor.  Additional work included building a computerized Futures
Trading System and writing a history of the company.  Mr. Handler
graduated on the Dean?s List from the University of Wisconsin-
Madison with a B.A. degree and a double major in History and
Political Science.

Effective May 1, 2006, Mr. Richard D. Gueren, age 45, is a
Director of Demeter.  Mr. Gueren is Executive Director, Retail
Options and Transactional Futures at Morgan Stanley.  He is
responsible for marketing the options product to the firm?s
<page> approximately 400 offices and 8,000 Financial Advisors.
Mr. Gueren first joined Dean Witter in August 1986, as a member
of the Options Strategy/Trading team.  In 1997, Dean Witter
merged with Morgan Stanley.  Mr. Gueren is the firm?s Senior
Registered Options Principal.  He is a member of several Morgan
Stanley committees, including the firm?s National Error Committee
and Best Execution Committee.  He is an advisory member to the
Credit & Risk Committee.  Mr. Gueren is also an active member of
several exchange and industry committees, including the Retail
Advisory committees for the Chicago Board Options Exchange, the
American Stock Exchanges, the Philadelphia Stock Exchange, the
Pacific Stock Exchange, and the International Securities
Exchange. Mr. Gueren is also an Industry Arbitrator for the NASD
and has been seated on numerous industry cases over the past
eight years. He has also been asked to testify as an expert
witness regarding options on numerous occasions.  Mr. Gueren
holds a Bachelor of Science in Economics from the University of
Hartford.

Effective May 1, 2006, Mr. Michael P. McGrath, age 38, is a
Director of Demeter.  Mr. McGrath is a Managing Director and the
Director of Product Development for Morgan Stanley?s Global
Wealth Management Group. In this role, Mr. McGrath oversees the
flow of new products and services being offered through Global
Wealth Management in the United States.  He coordinates the
firm?s New Product Committee as well as being a voting member on
<page> the committee.  He is also a voting member of the Global
Wealth Management Alternative Investments Due Diligence
Committee, the Global Wealth Management Insurance Due Diligence
Committee, and the Portfolio Architect Oversight Committee, and
is a member of the Global Advisor Research Due Diligence
Committee.  Mr. McGrath joined Morgan Stanley in 2004, after
three years with Nuveen Investments, a publicly traded investment
management company headquartered in Chicago, Illinois.  At
Nuveen, Mr. McGrath served as a Managing Director and oversaw the
development of alternative investment products catering to the
ultra-high net worth investor. Mr. McGrath received his B.A.
degree from Saint Peters College in 1990 and his MBA in Finance
from New York University in 1996.




Effective May 1, 2006, Mr. Andrew Saperstein, age 39, is a
Director of Demeter.  Mr. Saperstein is Chief Operating Officer
of National Sales for Morgan Stanley?s Global Wealth Management
Group, and serves as a member of the group?s Executive Committee.
One of the largest businesses of its kind in the world with $640
billion in client assets, the Global Wealth Management Group
provides a range of wealth management products and services to
individuals, businesses, and institutions.  These include
brokerage and investment advisory services, financial and wealth
planning, credit and lending, banking and cash management,
annuities and insurance, retirement and trust.  Prior to joining
Morgan Stanley in March 2006, Mr. Saperstein was with Merrill
<page> Lynch as First Vice President and Chief Operating Officer
of the Direct Division, and served as a member of the Global
Private Client Executive Committee.  In this capacity, he was
responsible for the oversight of the online brokerage unit and
the Financial Advisory Center, including the Retail Client
Relationship Management group, the Services, Operations and
Technology group, the Client Acquisition team, and the Business
Development and Analysis team.  Mr. Saperstein joined Merrill
Lynch in November 2001.  Prior to Merrill Lynch, Mr. Saperstein
was a partner in the Financial Institutions group of McKinsey &
Co.  Additionally, he served as co-leader of both the North
American Asset Management and Brokerage Practice and North
American Recruiting. Mr. Saperstein graduated cum laude from
Harvard Law School and summa cum laude from the Wharton
School/College of Arts and Sciences at the University of
Pennsylvania with a dual degree in Economics and Finance.

Effective September 22, 2006, Mr. Jacques Chappuis, age 37, is a
Director of Demeter.  Mr. Chappuis is a Managing Director of
Morgan Stanley and Head of Alternative Investments of Morgan
Stanley?s Global Wealth Management Group.  Prior to joining
Morgan Stanley in 2006, Mr. Chappuis was Head of Alternative
Investments for Citigroup?s Global Wealth Management Group and
prior to that, a Managing Director at Citigroup Alternative
Investments.  Before joining Citigroup, Mr. Chappuis was a <page>
consultant at the Boston Consulting Group, where he focused
on the financial services sector, and a corporate finance
Associate at Bankers Trust Company.  Mr. Chappuis received an MBA
in Finance, with honors, from the Columbia University Graduate
School of Business in 1998 and a B.A. in finance from Tulane
University in 1991.

Effective November 6, 2006, Mr. Lee Horwitz, age 55, is the Chief
Financial Officer of Demeter and a Principal of Demeter.  Mr.
Horwitz currently serves as an Executive Director within Morgan
Stanley?s Financial Control Group.  Mr. Horwitz joined Morgan
Stanley in March 1984 and has held a variety of positions
throughout Morgan Stanley?s organization during his tenure.  Mr.
Horwitz received a B.A. degree from Queens College and an MBA
from Rutgers University.  Mr. Horwitz is a Certified Public
Accountant.



All of the foregoing directors have indefinite terms.

Effective May 1, 2006, Mr. Jeffrey A. Rothman resigned his
position as a Director of Demeter.

Effective May 1, 2006, Mr. Richard A. Beech resigned his position
as a Director of Demeter.

<page> Effective May 1, 2006, Ms. Shelley Hanan resigned her
position as a Director of Demeter.
Effective November 6, 2006, Mr. Kevin Perry resigned his position
as Chief Financial Officer of Demeter.

The Audit Committee
The Partnership is operated by its general partner, Demeter, and
has no audit committee and, thus, no audit committee financial
expert.

Code of Ethics
The Partnership has not adopted a code of ethics that applies to
the Partnership?s principal executive officer, principal
financial officer, principal accounting officer or controller, or
persons performing similar functions.  The Partnership is
operated by its general partner, Demeter.  The President, Chief
Financial Officer, and each member of the Board of Directors of
Demeter are employees of Morgan Stanley and are subject to the
code of ethics adopted by Morgan Stanley, the text of
which can be viewed on Morgan Stanley?s website at http://
www.morganstanley.com/ourcommitment/codeofconduct.html.

Item 11.  EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers.  As a
limited partnership, the business of the Partnership is managed by
Demeter, which is responsible for the administration of the
<page> business affairs of the Partnership but receives no
compensation for such services.
Item 12. 	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
		MANAGEMENT AND RELATED SECURITY HOLDE MATTERS

(a)	Security Ownership of Certain Beneficial Owners - At December
31, 2006, there were no persons known to be beneficial owners of
more than 5 percent of the Units.

(b)	Security Ownership of Management - At December 31, 2006,
Demeter owned 167.309 Units of general partnership interest,
representing a 1.09 percent interest in the Partnership.


(c)	Changes in Control ? None.

Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
      DIRECTOR INDEPENDENCE

Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying Annual Report to
Limited Partners for the year ended December 31, 2006, which is
incorporated by reference to Exhibit 13.01 of this Form 10-K.  In
its capacity as the Partnership's retail commodity broker, Morgan
Stanley DW received commodity brokerage commissions (paid and
accrued by the Partnership) of $2,699,945 for the year ended
December 31, 2006.


<page>
Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership pays accounting fees as discussed in Note 1 to
the Financial Statements, ?Operating Expenses?, in the Annual
Report to the Limited Partners for the year ended December 31,
2006.

(1)  Audit Fees.  The aggregate fees for professional services
rendered by Deloitte & Touche LLP in connection with their audit
of the Partnership?s Financial Statements and review of the
Financial Statements included in the Quarterly Reports on Form
10-Q, audit of Management?s assessments of the effectiveness of
the internal control over financial reporting, and in connection
with statutory and regulatory filings were approximately $47,207
for the year ended December 31, 2006, and $44,596 for the year
ended December 31, 2005.

(2)	Audit-Related Fees.  None.

(3)	Tax Fees.  The Partnership did not pay Deloitte & Touche LLP
any amounts in 2006 and 2005 for professional services in
connection with tax compliance, tax advice, and tax planning.  The
Partnership engaged another unaffiliated professional firm to
provide services in connection with tax compliance, tax advice,
and tax planning.

(4)  All Other Fees.  None.
<page>
Because the Partnership has no audit committee, the Board of
Directors of Demeter, its general partner, functions as the audit
committee with respect to the Partnership.  The Board of
Directors of Demeter has not established pre-approval policies
and procedures with respect to the engagement of audit or
permitted non-audit services rendered to the Partnership.
Consequently, all audit and permitted non-audit services provided
by Deloitte & Touche LLP are approved by the Board of Directors
of Demeter and communicated to Morgan Stanley.


<page> PART IV
Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


1. Listing of Financial Statements
   The following Financial Statements and report of independent
   registered public accounting firm, all appearing in the
   accompanying Annual Report to Limited Partners for the year
   ended December 31, 2006, are incorporated by reference to
   Exhibit 13.01 of this Form 10-K:
?	Report of Deloitte & Touche LLP, independent registered
public accounting firm, for the years ended December
31, 2006, 2005, and 2004.

?	Statements of Financial Condition, including the
Schedules of Investments, as of December 31, 2006 and
2005.

?	Statements of Operations, Changes in Partners' Capital,
and Cash Flows for the years ended December 31, 2006,
2005, and 2004.

?	Notes to Financial Statements.

   With the exception of the aforementioned information and the
   information incorporated in Items 7, 8, and 13, the Annual
   Report to Limited Partners for the year ended December 31,
   2006, is not deemed to be filed with this report.

2. Listing of Financial Statement Schedules
   No Financial Statement schedules are required to be filed with
   this report.


<page>
3. Exhibits
   For the exhibits incorporated by reference or filed herewith
   to this report, refer to Exhibit Index on Pages E-1 to E-2.


<page> SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                           MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.
                                (Registrant)

                           BY:  Demeter Management Corporation,
                                General Partner

March 23, 2007             BY: /s/ Walter Davis
                                   Walter Davis,
                                   President


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Demeter Management Corporation.


BY: /s/ 	Walter Davis	                    		March 23, 2007
	  	Walter Davis, President

    /s/    Frank Zafran       	             		March 23, 2007
           Frank Zafran, Director

    /s/    Douglas J. Ketterer   	             		March 23, 2007
           Douglas J. Ketterer, Director

    /s/    Harry Handler		           		March 23, 2007
	    	Harry Handler, Director

    /s/ 	Richard Gueren        		         		March 23, 2007
	 	Richard Gueren, Director

    /s/	Michael McGrath		                 	March 23, 2007
	  	Michael McGrath, Director

    /s/  	Andrew Saperstein	                 	March 23, 2007
	    	Andrew Saperstein, Director

    /s/  	Jacques Chappuis		                 	March 23, 2007
	    	Jacques Chappuis, Director

    /s/  	Lee Horwitz			                 	March 23, 2007
	    	Lee Horwitz, Chief Financial Officer






<page>	EXHIBIT INDEX
ITEM

3.01	Amended and Restated Limited Partnership Agreement of the
Partnership, is incorporated by reference to Exhibit A of
the Partnership?s Prospectus, dated May 12, 1997, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933 on May
13, 1997.

3.02	Certificate of Limited Partnership, dated August 28,
1990, is filed herewith.

3.02(a)	Certificate of Amendment to the Certificate of Limited
Partnership, dated July 20, 2006 (changing its name from
Dean Witter Portfolio Strategy Fund L.P.) is incorporated
by reference to Exhibit 3.02 of the Partnership?s Form 8-
K (File No. 0-19046) filed with the Securities and
Exchange Commission on July 26, 2006.

10.01	Amended and Restated Management Agreement among the
Partnership, Demeter, and John W. Henry & Company, Inc.,
dated as of May 12, 1997, is incorporated by reference to
Exhibit 10.01 of the Partnership?s Form 10-Q for the
quarter ended June 30, 2002 (File No. 0-19046) filed with
the Securities and Exchange Commission on August 12,
2002.

10.01(a)	Amendment to Amended and Restated Management Agreement
between the Partnership and John Henry & Company, Inc.,
dated November 30, 2000, is incorporated by reference to
Exhibit 10.01 of the Partnership?s Form 8-K (File No. 0-
19046) filed with the Securities and Exchange Commission
on January 3, 2001.

10.02	Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW Inc., dated as of June
22, 2000, is incorporated by reference to Exhibit 10.01
of the Partnership?s Form 8-K (File No. 0-19046) filed
with the Securities and Exchange Commission on November
13, 2001.

10.03	Commodity Futures Customer Agreement between Morgan
Stanley & Co. Incorporated and the Partnership, and
acknowledged and agreed to by Morgan Stanley DW Inc.,
dated as of May 1, 2000, is incorporated by reference to
Exhibit 10.02 of the Partnership?s Form 8-K (File No. 0-
19046) filed with the Securities and Exchange Commission
on November 13, 2001.

E-1
<page>
10.04	Customer Agreement between the Partnership and Morgan
Stanley & Co. International Limited, dated as of May 1,
2000, is incorporated by reference to Exhibit 10.04 of the
Partnership?s Form 8-K (File No. 0-19046) filed with the
Securities and Exchange Commission on November 13, 2001.

10.05	Foreign Exchange and Options Master Agreement between
Morgan Stanley & Co. Incorporated and the Partnership,
dated as of April 30, 2000, is incorporated by reference
to Exhibit 10.05 of the Partnership?s Form 8-K (File No.
0-19046) filed with the Securities and Exchange Commission
on November 13, 2001.

10.07	Securities Account Control Agreement among the
Partnership, Morgan Stanley & Co. Incorporated, and Morgan
Stanley DW Inc., dated as of May 1, 2000, is incorporated
by reference to Exhibit 10.03 of the Partnership?s Form
8-K (File No. 0-19046) filed with the Securities and
Exchange Commission on November 13, 2001.

13.01	December 31, 2006, Annual Report to Limited Partners is
filed herewith.

31.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

32.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes?Oxley Act of 2002.

32.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
E-2
<PAGE>

                                                                      Portfolio
                                                                       Strategy
                                                                           Fund

            December 31, 2006
            Annual Report

    [LOGO]

Morgan Stanley

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

HISTORICAL FUND PERFORMANCE

Presented below is the percentage change in Net Asset Value per Unit from the
start of each calendar year the Fund has traded. Also provided is the
inception-to-date return and the compound annualized return since inception for
the Fund. Past performance is no guarantee of future results.

<TABLE>
<CAPTION>
                                                                                                                  INCEPTION-
                                                                                                                   TO-DATE
                       1991    1992  1993 1994  1995 1996 1997 1998 1999  2000 2001  2002 2003 2004  2005   2006    RETURN
FUND                    %       %     %    %     %    %    %    %    %     %    %     %    %    %     %      %        %
-----------------------------------------------------------------------------------------------------------------------------
<S>                  <C>       <C>   <C>  <C>   <C>  <C>  <C>  <C>  <C>   <C>  <C>   <C>  <C>  <C>  <C>    <C>    <C>
Portfolio Strategy
 Fund...............   27.7    (6.4) 19.9 (5.4) 25.4 25.5 11.3 9.5  (6.9) 9.9  (6.0) 26.7 3.7  9.6  (24.2) (18.9)   121.3
                     (11 mos.)
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                      COMPOUND
                     ANNUALIZED
                       RETURN
FUND                     %
-------------------------------
<S>                  <C>
Portfolio Strategy
 Fund...............    5.1

-------------------------------
</TABLE>

<PAGE>

DEMETER MANAGEMENT CORPORATION

330 Madison Avenue, 8th Floor
New York, NY 10017
Telephone (212) 905-2700

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.
ANNUAL REPORT
2006

Dear Limited Partner:

  This marks the sixteenth annual report for the Morgan Stanley Portfolio
Strategy Fund L.P. (formerly Dean Witter Portfolio Strategy Fund L.P.) (the
"Fund"). The Fund began the year trading at a Net Asset Value per Unit of
$2,727.77 and returned (18.9)% to $2,213.24 on December 31, 2006. The Fund
returned 121.3% since it began trading in February 1991 (a compound annualized
return of 5.1%).

  Detailed performance information for the Fund is located in the body of the
financial report. We provide a trading results by sector chart that portrays
trading gains and trading losses for the year in each sector in which the Fund
participates.

  The trading results by sector chart indicates the year's composite percentage
returns generated by the specific assets dedicated to trading within each
market sector in which the Fund participates. Please note that there is not an
equal amount of assets in each market sector, and the specific allocations of
assets by the Fund to each sector will vary over time within a predetermined
range. Below the chart is a description of the factors that influenced trading
gains and trading losses within the Fund during the year.

  Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 330 Madison Avenue, 8th Floor, New
York, NY 10017 or your Morgan Stanley Financial Advisor.

  I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is no
guarantee of future results.

Sincerely,

/s/ Walter J. Davis
Walter J. Davis
Chairman of the Board of Directors and President
Demeter Management Corporation,
General Partner of
Morgan Stanley Portfolio Strategy Fund L.P.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

                                      [CHART]

                    Year ended December 31, 2006
                    ----------------------------
Currencies                    -14.88%
Interest Rates                  0.22%
Stock Indices                   0.85%
Energies                       -2.14%
Metals                          2.67%
Agriculturals                  -1.93%



Note:Includes trading results and commissions but does not include other fees
     or interest income.

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
..  The most significant trading losses were experienced in the currency markets
   from both long and short positions in the Japanese yen as the value of the
   yen moved without consistent direction during the first quarter on
   uncertainty regarding future interest rate policy by the Bank of Japan. Long
   positions in the Australian dollar versus the U.S. dollar incurred
   additional losses during June as the U.S. dollar reversed higher amid
   diplomatic developments between the U.S. and Iran regarding Iran's nuclear
   research program. Further losses were incurred during the third quarter from
   short and long positions in the Swiss franc and the euro as the value of
   these currencies experienced short-term volatile price movement. During
   October, losses were incurred from short positions in the euro, Japanese
   yen, and Swiss franc versus the U.S. dollar as the value of the U.S. dollar
   declined towards the latter half of the month after the U.S. Department of
   Commerce reported slower than expected growth in third quarter U.S. Gross
   Domestic Product, as well as a faster than expected decline in consumer core
   inflation. Furthermore, the value of the U.S. dollar continued to move lower
   after the U.S. Federal Reserve held interest rates steady on October 25.
   Additionally, the Japanese yen strengthened after the Swiss National Bank
   said it had raised its holdings of the Japanese currency, while the euro
   moved higher after the IFO survey

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)

 showed an unexpected increase in German business confidence. Meanwhile, the
  Swiss franc strengthened in tandem with the euro. Finally, in December,
  losses were experienced from long positions in the Swiss franc, euro, and
  British pound versus the U.S. dollar as the value of the U.S. dollar moved
  higher relative to these currencies due to renewed optimism about the health
  of the U.S. economy.

..  Additional losses were incurred in the energy markets from long futures
   positions in crude oil and its related products as prices declined during
   February after an announcement by Chinese government authorities that China
   would place an emphasis on prospecting alternative energy sources in the
   future, reports of larger than expected supplies, and mild winter weather in
   the U.S. Northeast. Further losses in the energy markets were recorded
   during March from short positions in the aforementioned markets as prices
   strengthened early in the month on supply fears fueled by news of
   geopolitical tensions in Nigeria and Iran. Elsewhere in the energy markets,
   losses were incurred during March from short positions in natural gas
   futures as prices advanced on news from the U.S. Department of Energy that
   domestic reserves were lower than expected. In November, losses were
   experienced in the energy markets from short positions in gas oil and crude
   oil futures as prices rose on supply concerns after a major Nigerian
   facility ceased production following a hostage situation, and BP's Prudhoe
   Bay, Alaska facility experienced a pipeline delay. Prices continued to move
   higher amid concern over OPEC's production cut after the U.S. Department of
   Energy reported a sharp fall in domestic inventories of distillate products.
   Smaller losses were incurred, during November, from short positions in
   natural gas futures as prices reversed higher on colder temperatures
   forecasted in the U.S. and expectations of a decline in domestic inventories.

..  Losses were recorded in the agricultural complex, during the second quarter,
   from long positions in soybean and coffee futures as soybean prices reversed
   lower on news that supplies would increase and U.S. exports would decrease,
   while coffee prices moved lower after estimates that Brazil's coffee crop
   was larger than expected. Further losses in the agricultural complex were
   incurred towards the end of June from short positions in wheat, soybean, and
   corn futures as prices reversed higher amid reports of stronger demand and
   large volumes of speculative buying. Losses were also recorded during July
   and August from long positions in wheat and corn futures as prices fell amid
   favorable weather in the U.S. wheat and corn belts, while losses were
   recorded from short positions in coffee futures as prices increased at the
   beginning of August on news of potential for a drought during Brazil's
   coffee-blooming season and expectations of higher demand. Finally in
   December, additional losses were incurred from

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)

 long positions in soybean and wheat futures as prices moved lower after news
  that exports had slumped and favorable weather in the southern Great Plains
  that boosted prospects for the winter crop.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
..  Trading gains were recorded in the metals sector from long positions in
   copper, aluminum, and zinc futures as prices rallied sharply to record highs
   amid strong global industrial demand from the U.S., China, and India.
   Elsewhere in the metals markets, gains were also recorded from long futures
   positions in gold and silver as prices moved higher, primarily during the
   first half of the year, on continued geopolitical concerns regarding Iran's
   nuclear program, inflation concerns due to high oil prices, and the U.S.
   persistent demands from foreign central banks.

..  Within the global stock index sector, gains were experienced during first
   quarter from long positions in European, U.S., and Pacific Rim stock index
   futures as equity prices trended higher on strong corporate earnings and
   solid economic data. Long positions in European equity index futures also
   experienced gains during September as prices rose amid falling oil prices,
   merger and acquisition activity, and solid corporate earnings. Further gains
   in the global stock index market were experienced during October from long
   positions in U.S., European, and Australian stock index futures as prices
   advanced amid declining energy prices and favorable government reports,
   which showed few signs of increased global inflationary pressure. Finally,
   U.S. equity index futures prices increased after the U.S. Federal Reserve's
   decision to hold interest rates steady.

..  Smaller gains were experienced in the global fixed-income sector, primarily
   during March and April, from short positions in European and U.S.
   fixed-income futures as prices trended lower amid rising equity prices and
   strong economic data out of the Euro-Zone, while U.S. fixed-income prices
   declined on investor sentiment that the U.S. Federal Reserve would continue
   to increase interest rates in order to combat inflation. U.S. fixed-income
   prices also moved lower following the release of stronger than expected
   economic data. Further profits in the global fixed-income sector were
   incurred during August from long positions in Japanese, U.S., and German
   fixed-income futures as prices increased on higher demand amid concerns of a
   slowing global economy and geopolitical tensions.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

  Demeter Management Corporation ("Demeter"), the general partner of Morgan
Stanley Portfolio Strategy Fund L.P. (formerly Dean Witter Portfolio Strategy
Fund L.P.) (the "Partnership"), is responsible for the management of the
Partnership.

  Management of Demeter ("Management") is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.

  The Partnership's internal control over financial reporting includes those
policies and procedures that:

..  Pertain to the maintenance of records that, in reasonable detail, accurately
   and fairly reflect the transactions and dispositions of the assets of the
   Partnership;

..  Provide reasonable assurance that transactions are recorded as necessary to
   permit preparation of financial statements in accordance with generally
   accepted accounting principles, and that the Partnership's transactions are
   being made only in accordance with authorizations of Management and
   directors; and

..  Provide reasonable assurance regarding prevention or timely detection of
   unauthorized acquisition, use or disposition of the Partnership's assets
   that could have a material effect on the financial statements.

  Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.


<PAGE>

  Management assessed the effectiveness of the Partnership's internal control
over financial reporting as of December 31, 2006. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework. Based on our assessment and those criteria, Management believes that
the Partnership maintained effective internal control over financial reporting
as of December 31, 2006.

  Deloitte & Touche LLP, the Partnership's independent registered public
accounting firm, has issued an audit report on Management's assessment of the
Partnership's internal control over financial reporting and on the
effectiveness of the Partnership's internal control over financial reporting.
This report, which expresses unqualified opinions on Management's assessment
and on the effectiveness of the Partnership's internal control over financial
reporting, appears under "Report of Independent Registered Public Accounting
Firm" on the following page.

/s/ Walter J. Davis
Walter J. Davis
President
Demeter Management Corporation

/s/ Lee Horwitz
Lee Horwitz
Chief Financial Officer
Demeter Management Corporation

New York, New York
March 9, 2007

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Limited Partners and the General Partner:

  We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that Morgan
Stanley Portfolio Strategy Fund L.P. (formerly Dean Witter Portfolio Strategy
Fund L.P.) (the "Partnership") maintained effective internal control over
financial reporting as of December 31, 2006, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Partnership's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Partnership's internal
control over financial reporting based on our audit.

  We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinions.

  A company's internal control over financial reporting is a process designed
by, or under the supervision of, the company's principal executive and
principal financial officers, or persons performing similar functions, and
effected by the company's board of directors, management, and other personnel
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the

<PAGE>

company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial
statements.

  Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

  In our opinion, management's assessment that the Partnership maintained
effective internal control over financial reporting as of December 31, 2006, is
fairly stated, in all material respects, based on the criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion, the Partnership
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

  We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the financial statements as of and
for the year ended December 31, 2006 of the Partnership and our report dated
March 9, 2007 expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP

New York, New York
March 9, 2007

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Limited Partners and the General Partner:

  We have audited the accompanying statements of financial condition of Morgan
Stanley Portfolio Strategy Fund L.P. (formerly Dean Witter Portfolio Strategy
Fund L.P.) (the "Partnership"), including the schedules of investments, as of
December 31, 2006 and 2005, and the related statements of operations, changes
in partners' capital, and cash flows for each of the three years in the period
ended December 31, 2006. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

  We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

  In our opinion, such financial statements present fairly, in all material
respects, the financial position of Morgan Stanley Portfolio Strategy Fund L.P.
(formerly Dean Witter Portfolio Strategy Fund L.P.) at December 31, 2006 and
2005, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2006, in conformity with
accounting principles generally accepted in the United States of America.

  As discussed in Note 1, in 2006 and 2005, the Partnership modified its
classification of cash within the statements of cash flows.

<PAGE>

  We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the
Partnership's internal control over financial reporting as of December 31,
2006, based on the criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 9, 2007 expressed an unqualified opinion
on management's assessment of the effectiveness of the Partnership's internal
control over financial reporting and an unqualified opinion on the
effectiveness of the Partnership's internal control over financial reporting.

/s/ Deloitte & Touche LLP

New York, New York
March 9, 2007

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
                                                        $           $
     <S>                                            <C>         <C>
                                    ASSETS
     Equity in futures interests trading accounts:
       Unrestricted cash                            31,507,335  49,372,848
       Restricted cash                               2,993,509   4,896,815
                                                    ----------  ----------
         Total cash                                 34,500,844  54,269,663
                                                    ----------  ----------
       Net unrealized gain on open
        contracts (MSIL)                                35,900     555,721
       Net unrealized loss on open
        contracts (MS&Co.)                             (47,222)   (802,683)
                                                    ----------  ----------
         Total net unrealized loss on
          open contracts                               (11,322)   (246,962)
                                                    ----------  ----------
         Total Trading Equity                       34,489,522  54,022,701
     Interest receivable (Morgan Stanley DW)           123,403     143,702
     Due from Morgan Stanley DW                         86,178      35,002
                                                    ----------  ----------
         Total Assets                               34,699,103  54,201,405
                                                    ==========  ==========

                       LIABILITIES AND PARTNERS' CAPITAL

     LIABILITIES
     Redemptions payable                               446,039   1,050,448
     Accrued administrative expenses                   113,849     128,663
     Management fees payable                            57,738      90,272
                                                    ----------  ----------
         Total Liabilities                             617,626   1,269,383
                                                    ----------  ----------

     PARTNERS' CAPITAL

     Limited Partners (15,231.577 and
      19,201.528 Units, respectively)               33,711,181  52,377,441
     General Partner (167.309 and
      203.309 Units, respectively)                     370,296     554,581
                                                    ----------  ----------
         Total Partners' Capital                    34,081,477  52,932,022
                                                    ----------  ----------
         Total Liabilities and Partners' Capital    34,699,103  54,201,405
                                                    ==========  ==========

     NET ASSET VALUE PER UNIT                         2,213.24    2,727.77
                                                    ==========  ==========
</TABLE>

  The accompanying notes are an integral part of these financial statements.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                           FOR THE YEARS ENDED DECEMBER 31,
                                         -----------------------------------
                                            2006         2005        2004
                                         ----------  -----------  ----------
                                             $            $           $
  <S>                                    <C>         <C>          <C>
  INVESTMENT INCOME
    Interest income (Morgan Stanley DW)   1,626,207    1,439,069     719,231
                                         ----------  -----------  ----------

  EXPENSES
    Brokerage commissions
     (Morgan Stanley DW)                  2,699,945    4,137,112   4,980,851
    Management fees                         863,656    1,265,126   1,554,188
    Administrative expenses                 140,000      131,000     105,000
    Transaction fees and costs              137,383      211,164     310,496
    Incentive fee                            --           --           6,748
                                         ----------  -----------  ----------
     Total Expenses                       3,840,984    5,744,402   6,957,283
                                         ----------  -----------  ----------

  NET INVESTMENT LOSS                    (2,214,777)  (4,305,333) (6,238,052)
                                         ----------  -----------  ----------

  TRADING RESULTS
  Trading profit (loss):
    Realized                             (7,025,891)  (6,461,506) 10,571,095
    Net change in unrealized                235,640   (8,900,555)  2,427,270
                                         ----------  -----------  ----------
     Total Trading Results               (6,790,251) (15,362,061) 12,998,365
                                         ----------  -----------  ----------

  NET INCOME (LOSS)                      (9,005,028) (19,667,394)  6,760,313
                                         ==========  ===========  ==========

  NET INCOME (LOSS) ALLOCATION:
  Limited Partners                       (8,906,995) (19,436,831)  6,669,406
  General Partner                           (98,033)    (230,563)     90,907

  NET INCOME (LOSS) PER UNIT:
  Limited Partners                          (514.53)     (870.58)     315.31
  General Partner                           (514.53)     (870.58)     315.31
</TABLE>

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004

<TABLE>
<CAPTION>
                                UNITS OF
                               PARTNERSHIP   LIMITED     GENERAL
                                INTEREST     PARTNERS    PARTNER      TOTAL
                               ----------- -----------  ---------  -----------
                                                $           $           $
<S>                            <C>         <C>          <C>        <C>
Partners' Capital, December
31, 2003                       25,693.866   83,407,424    946,530   84,353,954
Net income                         --        6,669,406     90,907    6,760,313
Redemptions                    (2,447.777)  (7,466,653)     --      (7,466,653)
                               ----------  -----------  ---------  -----------
Partners'
Capital, December 31, 2004     23,246.089   82,610,177  1,037,437   83,647,614
Net loss                           --      (19,436,831)  (230,563) (19,667,394)
Redemptions                    (3,841.252) (10,795,905)  (252,293) (11,048,198)
                               ----------  -----------  ---------  -----------
Partners' Capital, December
31, 2005                       19,404.837   52,377,441    554,581   52,932,022
Net loss Redemptions                   --   (8,906,995)   (98,033)  (9,005,028)
                               (4,005.951)  (9,759,265)   (86,252)  (9,845,517)
                               ----------  -----------  ---------  -----------
Partners' Capital, December
31, 2006                       15,398.886   33,711,181    370,296   34,081,477
                               ==========  ===========  =========  ===========
</TABLE>

  The accompanying notes are an integral part of these financial statements.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                     FOR THE YEARS ENDED DECEMBER 31,
                                   ------------------------------------
                                       2006         2005        2004
                                   -----------  -----------  ----------
                                        $            $           $
<S>                                <C>          <C>          <C>
CASH FLOWS FROM
 OPERATING ACTIVITIES
Net income (loss)                   (9,005,028) (19,667,394)  6,760,313
Noncash item included in net
 income (loss):
  Net change in unrealized           (235,640)    8,900,555  (2,427,270)
(Increase) decrease in operating
 assets:
  Restricted cash                    1,903,306    7,743,051   1,187,394
  Interest receivable
   (Morgan Stanley DW)                  20,299     (50,945)     (46,406)
  Due from Morgan Stanley
   DW                                 (51,176)      311,574     (92,614)
Decrease in operating liabilities:
  Accrued administrative
   expenses                           (14,814)     (13,240)     (46,463)
  Management fees payable             (32,534)     (50,478)      (1,324)
                                   -----------  -----------  ----------
Net cash provided by (used for)
 operating activities               (7,415,587)  (2,826,877)  5,333,630
                                   -----------  -----------  ----------

CASH FLOWS FROM
 FINANCING ACTIVITIES
Cash paid for redemptions
 of Units                          (10,449,926) (10,518,507) (7,552,457)
                                   -----------  -----------  ----------
Net cash used for financing
 activities                        (10,449,926) (10,518,507) (7,552,457)
                                   -----------  -----------  ----------

Net decrease in unrestricted
 cash                              (17,865,513) (13,345,384) (2,218,827)

Unrestricted cash at beginning
 of period                          49,372,848   62,718,232  64,937,059
                                   -----------  -----------  ----------

Unrestricted cash at end
 of period                          31,507,335   49,372,848  62,718,232
                                   ===========  ===========  ==========
</TABLE>

  The accompanying notes are an integral part of these financial statements.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                  LONG UNREALIZED  PERCENTAGE   SHORT UNREALIZED  PERCENTAGE
FUTURES AND FORWARD CONTRACTS:                                      GAIN/(LOSS)   OF NET ASSETS   GAIN/(LOSS)    OF NET ASSETS
------------------------------                                    --------------- ------------- ---------------- -------------
2006 PARTNERSHIP NET ASSETS: $34,081,477                                 $              %              $               %
<S>                                                               <C>             <C>           <C>              <C>
Commodity                                                             119,667          0.35          261,756          0.77
Equity                                                                 74,963          0.22            --              --
Foreign currency                                                      222,890          0.65          207,313          0.61
Interest Rate                                                        (887,074)        (2.60)         204,837          0.60
                                                                     --------         -----        ---------         -----
  Grand Total:                                                       (469,554)        (1.38)         673,906          1.98
                                                                     ========         =====        =========         =====
  Unrealized Currency Loss

  Total Net Unrealized Loss per Statement of Financial Condition


2005 PARTNERSHIP NET ASSETS: $52,932,022
Commodity                                                            (126,786)        (0.24)        (397,387)        (0.75)
Equity                                                                309,031          0.58            --              --
Foreign currency                                                     (633,115)        (1.19)       1,277,662          2.41
Interest Rate                                                             613           --          (491,974)        (0.93)
                                                                     --------         -----        ---------         -----
  Grand Total:                                                       (450,257)        (0.85)         388,301          0.73
                                                                     ========         =====        =========         =====
  Unrealized Currency Loss

  Total Net Unrealized Loss per Statement of Financial Condition

</TABLE>
<TABLE>
<CAPTION>
                                                                  NET UNREALIZED
FUTURES AND FORWARD CONTRACTS:                                     GAIN/(LOSS)
------------------------------                                    --------------
2006 PARTNERSHIP NET ASSETS: $34,081,477                                $
<S>                                                               <C>
Commodity                                                             381,423
Equity                                                                 74,963
Foreign currency                                                      430,203
Interest Rate                                                        (682,237)
                                                                     --------
  Grand Total:                                                        204,352

  Unrealized Currency Loss                                           (215,674)
                                                                     --------
  Total Net Unrealized Loss per Statement of Financial Condition      (11,322)
                                                                     ========

2005 PARTNERSHIP NET ASSETS: $52,932,022
Commodity                                                            (524,173)
Equity                                                                309,031
Foreign currency                                                      644,547
Interest Rate                                                        (491,361)
                                                                     --------
  Grand Total:                                                        (61,956)

  Unrealized Currency Loss                                           (185,006)
                                                                     --------
  Total Net Unrealized Loss per Statement of Financial Condition     (246,962)
                                                                     ========
</TABLE>

  The accompanying notes are an integral part of these financial statements.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION.  Morgan Stanley Portfolio Strategy Fund L.P. (formerly Dean
Witter Portfolio Strategy Fund L.P.) (the "Partnership") is a limited
partnership organized to engage primarily in the speculative trading of futures
and forward contracts on physical commodities and other commodity interests,
including, but not limited to, foreign currencies, financial instruments,
metals, energy, and agricultural products (collectively, "Futures Interests").
  Effective July 20, 2006, Dean Witter Portfolio Strategy Fund L.P. was renamed
to Morgan Stanley Portfolio Strategy Fund L.P.
  The Partnership's general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Morgan Stanley DW Inc.
("Morgan Stanley DW"). The clearing commodity brokers are Morgan Stanley & Co.
Incorporated ("MS&Co.") and Morgan Stanley & Co. International Limited
("MSIL"). MS&Co. acts as the counterparty on all of the foreign currency
forward contracts. In 2007, Morgan Stanley intends to merge Morgan Stanley DW
into MS&Co. Upon completion of the merger, the surviving entity, MS&Co., will
be the Partnership's principal U.S. commodity broker-dealer. Demeter, Morgan
Stanley DW, MS&Co., and MSIL are wholly-owned subsidiaries of Morgan Stanley.
  John W. Henry & Company, Inc. ("JWH") is the trading manager for the
Partnership.
  Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by Demeter and the limited partners
based upon their proportional ownership interests.

USE OF ESTIMATES.  The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make estimates and assumptions that affect the reported
amounts in the financial statements and related disclosures. Management
believes that the estimates utilized in the preparation of the financial
statements are prudent and reasonable. Actual results could differ from those
estimates.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)


REVENUE RECOGNITION.  Futures Interests are open commitments until settlement
date, at which time they are realized. They are valued at market on a daily
basis and the resulting net change in unrealized gains and losses is reflected
in the change in unrealized trading profit (loss) on open contracts from one
period to the next on the Statements of Operations. Monthly, Morgan Stanley DW
pays the Partnership interest income on 80% of its average daily Net Assets for
the month at the prevailing rate for U.S. Treasury bills. For purposes of such
interest payments, Net Assets do not include monies owed to the Partnership on
Futures Interests.
  The Partnership's functional currency is the U.S. dollar; however, it
transacts business in currencies other than the U.S. dollar. Assets and
liabilities denominated in currencies other than the U.S. dollar are translated
into U.S. dollars at the rates in effect at the date of the Statements of
Financial Condition. Income and expense items denominated in currencies other
than the U.S. dollar are translated into U.S. dollars at the rates in effect
during the period. Gains and losses resulting from the translation to U.S.
dollars are reported in income currently.

NET INCOME (LOSS) PER UNIT.  Net income (loss) per unit of limited partnership
interest ("Unit(s)") is computed using the weighted average number of Units
outstanding during the period.

NEW ACCOUNTING DEVELOPMENTS.  In July 2006, the Financial Accounting Standards
Board ("FASB") issued Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes--an interpretation of FASB Statement 109" ("FIN 48"). FIN 48
clarifies the accounting for income taxes by prescribing the minimum
recognition threshold a tax position must meet before being recognized in the
financial statements. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The impact to the Partnership's Financial Statements, if
any, is currently being assessed.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

  In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS No. 157 is effective for the Partnership as of January 1, 2008. The impact
to the Partnership's Financial Statements, if any, is currently being assessed.
  In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB No. 108") to provide guidance on how the effects of the
carryover or reversal of prior year unrecorded misstatements should be
considered in quantifying a current year misstatement. SAB No. 108 requires a
company to apply an approach that considers the amount by which the current
year income statement is misstated ("rollover approach") and an approach that
considers the cumulative amount by which the current year balance sheet is
misstated ("iron-curtain approach"). Prior to the issuance of SAB No. 108, many
companies applied either the rollover or iron-curtain approach for purposes of
assessing materiality of misstatements. SAB No. 108 is effective for the
Partnership as of January 1, 2007. Upon adoption, SAB No. 108 allows a one-time
cumulative effect adjustment against Partners' Capital for those prior
year misstatements that were not material under the Partnership's prior
approach, but that are deemed material under the SAB No. 108 approach. Demeter
does not expect the adoption of SAB No. 108 to have a material impact on the
Partnership's Financial Statements.
EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS.  The Partnership's asset "Equity
in futures interests trading accounts," reflected on the Statements of
Financial Condition, consists of (A) cash on deposit with Morgan Stanley DW,
MS&Co., and MSIL to be used as margin for trading and (B) net unrealized gains
or losses on open contracts, which are valued at market and calculated as the
difference between original contract value and market value.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

  The Partnership, in the normal course of business, enters into various
contracts with MS&Co. and MSIL acting as its commodity brokers. Pursuant to
brokerage agreements with MS&Co. and MSIL, to the extent that such trading
results in unrealized gains or losses, the amounts are offset and reported on a
net basis on the Partnership's Statements of Financial Condition.
  The Partnership has offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under the terms of
its master netting agreement with MS&Co., the sole counterparty on such
contracts. The Partnership has consistently applied its right to offset.

BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS.  The Partnership
accrues brokerage commissions and transaction fees and costs on a half-turn
basis, at 80% and 100%, respectively, of the rates Morgan Stanley DW and
MS&Co., respectively, charges parties that are not clearinghouse members.
Brokerage commissions and transaction fees and costs combined are capped at
13/20 of 1% per month (a maximum 7.8% annual rate) of the Partnership's
month-end Net Assets applied on a per trading program basis.

OPERATING EXPENSES.  The Partnership bears all expenses related to its trading
activities, to a maximum of  1/4 of 1% annually of the Partnership's average
month-end Net Assets. These include filing fees, clerical, administrative,
auditing, accounting, mailing, printing, and other incidental operating
expenses as permitted by the Limited Partnership Agreement. In addition, the
Partnership incurs a monthly management fee and may incur an incentive fee.
Demeter and/or Morgan Stanley DW bear all other operating expenses.

REDEMPTIONS.  Limited partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the last day of any month upon five business
days advance notice by redemption form to Demeter.

DISTRIBUTIONS.  Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date. Demeter does not intend to make any distributions of the
Partnership's profits.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

INCOME TAXES.  No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership's revenues
and expenses for income tax purposes.

DISSOLUTION OF THE PARTNERSHIP.  The Partnership will terminate on December 31,
2025 or at an earlier date if certain conditions set forth in the Limited
Partnership Agreement occur.

RECLASSIFICATIONS.  Certain prior year amounts relating to cash balances were
reclassified on the Statements of Cash Flows to conform to 2006 and 2005
presentation. Such reclassifications have no impact on the Partnership's
reported net income (loss).

--------------------------------------------------------------------------------
2. RELATED PARTY TRANSACTIONS
The Partnership pays brokerage commissions to Morgan Stanley DW as described in
Note 1. The Partnership's cash is on deposit with Morgan Stanley DW, MS&Co.,
and MSIL in futures interests trading accounts to meet margin requirements as
needed. Morgan Stanley DW pays interest on these funds as described in Note 1.

--------------------------------------------------------------------------------
3. TRADING MANAGER
Compensation to JWH consists of a management fee and an incentive fee as
follows:

MANAGEMENT FEE.  The Partnership pays a management fee equal to  1/6 of 1% per
month (a 2% annual rate) of the Partnership's adjusted Net Assets, as defined
in the Limited Partnership Agreement, as of the last day of each month.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)


INCENTIVE FEE.  The Partnership pays a quarterly incentive fee equal to 20% of
the Partnership's new appreciation of its Net Assets as of the end of each
calendar quarter. New appreciation represents the amount by which Net Assets
are increased by profits from futures and forwards trading that exceed losses
after brokerage commissions, management fees, transaction fees and costs, and
administrative expenses are deducted. Such incentive fee is accrued in each
month in which new appreciation occurs. In those months in which new
appreciation is negative, previous accruals, if any, during the incentive
period are reduced. In those instances in which a limited partner redeems an
investment, the incentive fee (if earned through a redemption date) is paid to
JWH on those redemptions in the month of such redemptions.

--------------------------------------------------------------------------------
4. FINANCIAL INSTRUMENTS
The Partnership trades Futures Interests. Futures and forwards represent
contracts for delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the potential
inability of counterparties to perform under the terms of the contracts. There
are numerous factors which may significantly influence the market value of
these contracts, including interest rate volatility.
  The market value of exchange-traded contracts is based on the settlement
price quoted by the exchange on the day with respect to which market value is
being determined. If an exchange-traded contract could not have been liquidated
on such day due to the operation of daily limits or other rules of the
exchange, the settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The market value of
off-exchange-traded contracts is based on the fair market value quoted by the
counterparty.
  The Partnership's contracts are accounted for on a trade-date basis and
marked to market on a daily basis. The Partnership accounts for its derivative
investments in accordance with the provisions of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities"

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

("SFAS No. 133"). SFAS No. 133 defines a derivative as a financial instrument
or other contract that has all three of the following characteristics:

(1) One or more underlying notional amounts or payment provisions;

(2) Requires no initial net investment or a smaller initial net investment than
    would be required relative to changes in market factors;

(3) Terms require or permit net settlement.

Generally, derivatives include futures, forward, swaps or options contracts,
and other financial instruments with similar characteristics such as caps,
floors, and collars.
  The net unrealized gains (losses) on open contracts at December 31, reported
as a component of "Equity in futures interests trading accounts" on the
Statements of Financial Condition, and their longest contract maturities were
as follows:

<TABLE>
<CAPTION>
         NET UNREALIZED GAINS/
      (LOSSES) ON OPEN CONTRACTS   LONGEST MATURITIES
     ----------------------------  -------------------
                 OFF-                          OFF-
     EXCHANGE- EXCHANGE-           EXCHANGE- EXCHANGE-
YEAR  TRADED    TRADED     TOTAL    TRADED    TRADED
---- --------- --------- --------  --------- ---------
         $         $         $
<S>  <C>       <C>       <C>       <C>       <C>
2006 (441,525)  430,203   (11,322) Dec. 2007 Mar. 2007
2005 (891,509)  644,547  (246,962) Dec. 2006 Mar. 2006
</TABLE>

  The Partnership has credit risk associated with counterparty nonperformance.
As of the date of the financial statement, the credit risk associated with the
instruments in which the Partnership trades is limited to the amounts reflected
in the Partnership's Statements of Financial Condition.
  The Partnership also has credit risk because Morgan Stanley DW, MS&Co., and
MSIL act as the futures commission merchants or the counterparties, with
respect to most of the Partnership's assets. Exchange-traded futures and
exchange-traded forward contracts are marked to market on a daily basis, with
variations in value settled on a daily basis. Morgan Stanley DW, MS&Co., and
MSIL, each as a futures commission merchant for the Partnership's
exchange-traded futures and exchange-traded forward contracts, are required,
pursuant to regulations of the Commodity Futures

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

Trading Commission, to segregate from their own assets, and for the sole
benefit of their commodity customers, all funds held by them with respect to
exchange-traded futures and exchange-traded forward contracts, including an
amount equal to the net unrealized gains (losses) on all open exchange-traded
futures contracts, which funds, in the aggregate, totaled $34,059,319 and
$53,378,154 at December 31, 2006 and 2005, respectively. With respect to the
Partnership's off-exchange-traded forward currency contracts, there are no
daily settlements of variation in value, nor is there any requirement that an
amount equal to the net unrealized gains (losses) on such contracts be
segregated. However, the Partnership is required to meet margin requirements
equal to the net unrealized loss on open forward currency contracts in the
Partnership accounts with the counterparty, which is accomplished by daily
maintenance of the cash balance in a custody account held at Morgan Stanley DW
for the benefit of MS&Co. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of MS&Co., the
sole counterparty on all such contracts, to perform. The Partnership has a
netting agreement with MS&Co. This agreement, which seeks to reduce both the
Partnership's and MS&Co.'s exposure on off-exchange-traded forward currency
contracts, should materially decrease the Partnership's credit risk in the
event of MS&Co.'s bankruptcy or insolvency.

<PAGE>

MORGAN STANLEY PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(concluded)


--------------------------------------------------------------------------------
5. FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                             2006       2005       2004
                                          ---------  ---------  ---------
      <S>                                 <C>        <C>        <C>
      PER UNIT OPERATING
       PERFORMANCE:
      NET ASSET VALUE, JANUARY 1:         $2,727.77  $3,598.35  $3,283.04
                                          ---------  ---------  ---------
      NET OPERATING RESULTS:
         Interest Income                      93.81      66.35      29.45
         Expenses                           (221.58)   (264.87)   (284.85)
         Realized Profit (Loss)             (400.35)   (261.66)    471.33
         Unrealized Profit (Loss)             13.59    (410.40)     99.38
                                          ---------  ---------  ---------
         Net Profit (Loss)                  (514.53)   (870.58)    315.31
                                          ---------  ---------  ---------
      NET ASSET VALUE,
       DECEMBER 31:                       $2,213.24  $2,727.77  $3,598.35
                                          =========  =========  =========
      FOR THE CALENDAR YEAR:
      RATIOS TO AVERAGE NET
       ASSETS:
         Net Investment Loss                 (5.2)%     (6.9)%     (8.1)%
         Expenses before Incentive fees       9.1 %      9.2 %      9.1 %
         Expenses after Incentive fees        9.1 %      9.2 %      9.1 %
         Net Profit (Loss)                  (21.3)%    (31.7)%      8.8 %
      TOTAL RETURN BEFORE
       INCENTIVE FEES                       (18.9)%    (24.2)%      9.6 %
      TOTAL RETURN AFTER
       INCENTIVE FEES                       (18.9)%    (24.2)%      9.6 %
      INCEPTION-TO-DATE RETURN              121.3 %
      COMPOUND ANNUALIZED
       RETURN                                 5.1 %
</TABLE>

<PAGE>


                    Demeter Management Corporation
                    330 Madison Avenue, 8th Floor
                    New York, NY 10017

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